Economies of scale occur when
A) a firm's long-run average total costs fall as it increases the quantity of output it produces.
B) the marginal product of labour is greater than the average product of labour.
C) short-run marginal cost falls.
D) the demand for a firm's output increases.

Question

Quizplus · Accepted Answer

Economies of scale occur when a firm's long-run average total costs fall as it increases the quantity of output it produces. This happens because fixed costs are spread over a larger output, leading to lower average costs. In other words, as production increases, the cost per unit decreases.

Economies of Scale Occur When