If average costs of production decline with increases in output for a particular firm:

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Quizplus · Accepted Answer

If a firm experiences decreasing average costs of production with increasing output, it means that they are benefiting from economies of scale. Typically, larger firms benefit from economies of scale because they are able to spread fixed costs (like rent, machinery, and equipment) over a greater amount of output, which leads to lower average costs. In contrast, small firms are not able to spread these fixed costs over as much output, so their average costs are typically higher. Therefore, one large producer will be more efficient than many small producers.

If Average Costs of Production Decline with Increases in Output