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 statements is correct.

Question

Quizplus · Accepted Answer

Economies of scale occur when long-run average costs decrease as output is increased. This is because as production increases, fixed costs can be spread over a greater number of units, resulting in lower average costs per unit. Additionally, there may be cost savings from increased specialization, more efficient use of resources, and better bargaining power with suppliers.

Economies of Scale Exist Whenever Long-Run Average Costs