When there are economies of scale,
A)per-unit costs increase as output increases
B)per-unit costs decrease as output increases
C)per-unit costs are constant as output increases
D)output does not affect per-unit costs

Question

​When there are economies of scale,
A)​per-unit costs increase as output increases
B)per-unit costs decrease as output increases
C)per-unit costs are constant as output increases
D)​output does not affect per-unit costs

Quizplus · Accepted Answer

Economies of scale refer to the phenomenon where per-unit costs decrease as the quantity of output increases. This happens because fixed costs (e.g., rent, machinery) are spread over a larger number of units, resulting in a lower per-unit cost. As output expands, firms can also take advantage of bulk discounts on inputs, specialized machinery, or division of labor, further reducing costs. Therefore, choice B is the best option.

​When There Are Economies of Scale

When There Are Economies of Scale