Question 21
Theory of Costs and RevenueA firm enjoying economies of scale is said to be
- A.reducing average cost as production increases
- B.benefiting from the activities of other firms
- C.maximizing profits as production increases
- D.having an upward-sloping average cost curve.
Show the answer and explanation
Answer: A (reducing average cost as production increases)
Explanation
Economies of scale are the cost savings a firm gets from growing, so its average cost falls as output rises.