Economies of scale are:
A) unit cost increases associated with learning effects.
B) unit cost reductions due to inferior quality of products.
C) realized when output is reduced to a minimum.
D) realized when the selling price is equal to the cost price of the products.
E) unit cost reductions associated with a large-scale output.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a business can achieve by increasing its production efficiency through larger output. These unit cost reductions are associated with large-scale output and are the result of factors such as spreading fixed costs over a greater number of units and increased bargaining power over suppliers. Therefore, the best choice is E.

Economies of Scale Are