Which of the following is a characteristic of economies of scale?
A)The average cost declines as output increases
B)The average cost increases as output increases
C)The average cost remains constant as output increases
D)The average costs are cheaper when a firm produces a wider variety of goods
E)The average cost curve takes the form of a U-shape

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that businesses gain when they increase production. When a firm experiences economies of scale, the average cost of producing each unit of output decreases as the scale of production increases. This is because the fixed costs of production are spread over more units, resulting in lower average costs. A decreasing average cost curve takes the form of a U-shape, but it is important to note that economies of scale only occur up to a certain point. Beyond this point, the firm may experience diseconomies of scale, where the average cost of production increases as output increases.

Which of the Following Is a Characteristic of Economies of Scale