Suppose that in 2012 ABC Corp. produced 500 million units of a good at an average cost of $2, and in 2013 ABC Corp. expanded its plant capacity and produced 600 million units at an average cost of also $2. In this range, one can conclude that ABC Corp. is experiencing
A) economies of scale.
B) diseconomies of scale.
C) neither economies of scale or diseconomies of scale.
D) diminishing marginal product.

Question

Quizplus · Accepted Answer

With a constant average cost per unit even with an increase in production, ABC Corp. is not experiencing economies of scale or diseconomies of scale. This suggests that ABC Corp. has constant returns to scale, meaning that increasing production does not result in lower average costs.

Suppose That in 2012 ABC Corp