In some industries production costs per unit are less in a large facility than in a small facility. This concept is called _____.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost because these costs are spread out over a larger number of goods.

In Some Industries Production Costs Per Unit Are Less in a Large