Economies of scale exist whenever long-run average costs:
A) increase as output is increased.
B) decrease as output is increased.
C) remain constant as output is increased.
D) None of the preceding statements is correct.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that firms achieve by increasing their level of production. As output increases, long-run average costs decrease due to factors such as specialization, efficient use of resources, and increased bargaining power with suppliers. Therefore, the correct answer is B, as long-run average costs decrease as output is increased.

Economies of Scale Exist Whenever Long-Run Average Costs