Economies of scale occur when there are
A) decreases in long-run average costs resulting from increases in output.
B) no changes in long-run average costs when output increases.
C) increases in long-run average costs when output increases.
D) decreases in output resulting from decreases in input.

Question

Quizplus · Accepted Answer

Economies of scale occur when there are decreases in long-run average costs resulting from increases in output. This is because when a firm produces more output, it can spread its fixed costs over a larger number of units, leading to a lower average cost per unit. Additionally, a larger scale of production may allow the firm to take advantage of bulk discounts on inputs or use more efficient technology, further reducing costs.

Economies of Scale Occur When There Are