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JAMB Economics 2013 Question 21

Question 21

Theory of Costs and Revenue

If a refinery achieves a reduction in cost by purchasing and transporting crude oil in large quantities, it enjoys

  1. A.economies of scale.
  2. B.specialization.
  3. C.division of labour.
  4. D.diseconomies of scale.
Show the answer and explanation

Answer: A (economies of scale.)

Explanation

Buying and transporting in bulk lowers average cost as the firm grows: an economy of scale.