Economies of scale exist as a firm increases its size in the long run because of all of the following except
A)the firm can afford more sophisticated technology in production.
B)labour and management can specialise even further in their tasks.
C)as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
D)as a firm expands its production, its profit margin per unit of output increases.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages a firm enjoys as it increases production. These cost advantages can arise due to various factors such as technology, specialization, and purchasing power. However, as the firm expands its production, its profit margin per unit of output may not necessarily increase. This is because there could be other factors such as competition and market demand which can affect the price that the firm can charge for its output. Therefore, option D is the correct answer as it does not reflect a valid reason for the existence of economies of scale.

Economies of Scale Exist as a Firm Increases Its Size