A manufacturer creates massive demand for its new plastic sandal and greatly increases its production level.Over time, its high-volume production brought on by demand stimulation results in lower costs.This is an example of

Question

Quizplus · Accepted Answer

The situation described in the question refers to economies of scale. When a manufacturer increases its production level, it can achieve lower costs per unit, resulting in increased profitability. This is because fixed costs can be spread over a larger number of units, reducing the per-unit cost. In this case, the manufacturer stimulated demand for its new product (plastic sandals) and increased production to meet the demand, leading to lower costs per unit over time.

A Manufacturer Creates Massive Demand for Its New Plastic Sandal