Economies of scale are
A) unit cost reductions associated with learning effects.
B) unit cost reductions associated with superior customer responsiveness.
C) realized when output is as large as possible.
D) realized when the point of maximum efficient scale is reached.
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 obtains due to the large volume of production. As the scale of production increases, the average cost of production decreases, resulting in lower prices for consumers and higher profits for the producer. In other words, economies of scale are achieved when the unit cost of production decreases with an increase in the scale of output. Therefore, option E, which states that economies of scale are unit cost reductions associated with a large-scale output, is the best choice.

Economies of Scale Are