When increasing its output results in falling costs, a firm that can adjust all inputs is experiencing
A) diseconomies of scale.
B) economies of scale.
C) loss.
D) capital gains.

Question

Quizplus · Accepted Answer

Economies of scale occur when a firm can increase its output and experience falling costs due to efficiency gains from larger scale production. This can be achieved through adjusting all inputs of the production process. Diseconomies of scale occur when a firm grows too large and experiences increasing costs due to coordination and communication challenges. Loss and capital gains are not relevant concepts in this context.

When Increasing Its Output Results in Falling Costs, a Firm