Question

It is said to be economies of scale when:

• A. Long run average total cost declines as output increases
• B. Long run average total cost rises as output increases
• C. Long run average total cost does not vary with the level of output
• D. Long run fixed cost stays constant as output increases

Hint:

Economies of scale lead to lower costs as production increases.

Answer 1

The Correct Option is A

Economies of scale arise when greater production volume reduces per-unit costs. This is attributed to factors like bulk buying, improved fixed cost utilization, and operational efficiencies.