Asked by Archit Barua on Jun 10, 2024
Verified
The ability to lower the average costs of production as the quantity produced increases is called
A) Economies of scale
B) Economies of scope
C) Diseconomies of scale
D) Diseconomies of scope
Economies Of Scale
A situation where the cost per unit of output decreases as the scale of production increases.
- Comprehend the principle of economies and diseconomies of scale.
Verified Answer
FA
Fabiola ArguihoJun 16, 2024
Final Answer :
A
Explanation :
Economies of scale refer to the cost advantages that a firm can achieve by increasing the scale of production. As the quantity produced increases, firms can take advantage of bulk discounts on raw materials, lower per-unit labor costs, and more efficient use of capital equipment, which all help to lower the average cost of producing each unit. Economies of scope, on the other hand, refer to the cost savings that a firm can achieve by producing a range of related products together. Diseconomies of scale occur when the average cost of producing each unit increases as the firm continues to grow, while diseconomies of scope occur when the cost savings from producing related products together are smaller than the costs of running the business as a whole.
Learning Objectives
- Comprehend the principle of economies and diseconomies of scale.
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