The ability to lower the average costs of production as the quantity produced increases is called
A)Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)Diseconomies of scope

Question

The ability to lower the average costs of production as the quantity produced increases is called​
A)​Economies of scale
B)Economies of scope
C)Diseconomies of scale
D)​Diseconomies of scope

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a firm can achieve by increasing the scale of production. As the quantity produced increases, firms can take advantage of bulk discounts on raw materials, lower per-unit labor costs, and more efficient use of capital equipment, which all help to lower the average cost of producing each unit. Economies of scope, on the other hand, refer to the cost savings that a firm can achieve by producing a range of related products together. Diseconomies of scale occur when the average cost of producing each unit increases as the firm continues to grow, while diseconomies of scope occur when the cost savings from producing related products together are smaller than the costs of running the business as a whole.

The Ability to Lower the Average Costs of Production as the Quantity