Asked by Dathan Trejo on Jun 13, 2024
Verified
Suppose that a firm's long-run average total costs of producing televisions decreases as it produces between 70,000 and 80,000 televisions. For this range of output, the firm is experiencing
A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) coordination problems.
Economies of Scale
The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.
Long-run Average Total Costs
The average cost per unit of output where all inputs, including capital, are variable and the firm has adjusted all inputs to find the lowest average cost.
- Gain an understanding of the theories behind economies of scale, diseconomies of scale, and constant returns to scale.
- Examine the effects of variations in output on an organization's long-term expenses.
Verified Answer
KL
Katie LernerJun 16, 2024
Final Answer :
A
Explanation :
Economies of scale occur when an increase in production leads to a decrease in the average cost of each unit produced. Since the firm's long-run average total costs decrease as it produces more televisions within the specified range, it is experiencing economies of scale.
Learning Objectives
- Gain an understanding of the theories behind economies of scale, diseconomies of scale, and constant returns to scale.
- Examine the effects of variations in output on an organization's long-term expenses.