Economies of scale:
A)is the same thing as increasing returns to scale.
B)exist if a firm increases its output more than in proportion to its total input cost.
C)exist if a firm increases its output precisely proportional to its total input cost.
D)refers to the ability to make large-scale investments in capital.

Question

Quizplus · Accepted Answer

Economies of scale exist if a firm increases its output more than in proportion to its total input cost. This means that as a firm increases its production levels, its unit costs will decrease, leading to greater efficiency and profitability. It is not the same thing as increasing returns to scale (A), which refers to the situation where output increases more than proportionately to inputs, and it is not simply increasing output precisely proportional to total input cost (C). While economies of scale may involve investments in capital (D), this is not the best description of the concept.

Economies of Scale