Economies of scale can arise from:
A)cost reductions gained through decreased production.
B)high prices on bulk purchases of raw material inputs and component parts.
C)an advantage gained by spreading fixed production costs over a large production volume.
D)increased spending on marketing and advertising activities.
E)poor production operations.

Question

Economies of scale can arise from:
A)cost reductions gained through decreased production.
B)high prices on bulk purchases of raw material inputs and component parts.
C)an advantage gained by spreading fixed production costs over a large production volume.
D)increased spending on marketing and advertising activities. 
E)poor production operations.

Quizplus · Accepted Answer

Economies of scale refer to the phenomenon where the cost of production per unit decreases as the volume of production increases. This can be achieved by spreading fixed costs (such as rent, utilities, and equipment) over a larger number of units produced. By doing so, the fixed cost per unit decreases, leading to lower overall costs of production. Option C correctly identifies this. The other options do not accurately describe the concept of economies of scale.

Economies of Scale Can Arise From