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WAEC Economics 2017 Question 17

Question 17

Theory of Production

When a firm is enjoying internal economies of scale, its

  1. A.total cost of production is increasing as output increases.
  2. B.average fixed cost is rising continuously.
  3. C.average cost of production decreases as output increases.
  4. D.average revenue and marginal revenue are decreasing.
Show the answer and explanation

Answer: C (average cost of production decreases as output increases.)

Explanation

Economies of scale mean average cost falls as output grows.