In an industry characterized by extensive economies of scale:
A)small companies are more profitable than are large companies.
B)large companies are more profitable than are small companies.
C)small and large companies are equally profitable.
D)small companies will drive out large companies.

Question

Quizplus · Accepted Answer

In an industry with extensive economies of scale, larger companies are typically more profitable than smaller ones. This is because larger companies are able to spread their fixed costs (such as equipment and facilities) over a larger quantity of output, resulting in lower average costs and higher profit margins. Additionally, larger companies may have more bargaining power with suppliers and customers, allowing them to negotiate better prices and terms.

In an Industry Characterized by Extensive Economies of Scale