Question

Economies of scale are: Select one: a. unit cost increases associated with learning effects. b. unit cost reductions associated with a large-scale output. c. realized when output is reduced to a minimum. d. realized when the selling price is equal to the cost price of the products. e. unit cost reductions due to inferior quality of products.

Answer 1

The correct answer is option b.

Step-by-step explanation:

Economies of scale refer to the reduction in the average cost of production as the quantity of output produced increases. In the production process, there is some fixed and variable cost involved.

The average cost of production is the ratio of the total cost incurred in the process of production and the level of output. It is the cost of producing each unit of output.

The producers can reduce their cost of production through the division of labor and specialization.