Generally, as a movie theater adds more screens its average costs fall. The movie theater can be said to experience
A) declining profit
B) higher prices
C) diseconomies of scale
D) economies of scale
E) diminishing marginal returns

Question

Quizplus · Accepted Answer

As the movie theater adds more screens, its average costs fall due to economies of scale. This means that the theater is able to spread its fixed costs (such as rent and utilities) over a greater number of screens, resulting in lower average costs per screen. This can lead to increased profitability for the theater, as it can potentially attract more customers with a greater variety of movie options while also decreasing its costs.

Generally, as a Movie Theater Adds More Screens Its Average