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 occur when increasing the level of production leads to lower per-unit costs. This happens due to factors like bulk purchasing, better utilization of fixed costs, and operational efficiencies.