Question

How is efficiency related to the number of firms in an industry characterized by strong economies of scale?

a. efficiency is unrelated to the number of firms in an industry and therefore unrelated to economies of scale.
b. because firms face less competition when the number of firms declines in an industry, efficiency tends to decrease as the number of firms decreases. this is true particularly in industries with strong economies of scale. so fewer firms will lead to greater inefficiency in a market with strong economies of scale.
c. in industries with strong economies of scale, efficiency tends to increase as the number of firms increases because firms face more competitors. as firms compete, they will increase output, lowering costs per unit.
d. in industries with strong economies of scale, efficiency tends to increase as the number of firms decreases. as each firm increases its output, its costs per unit fall. this means that fewer firms each producing higher output leads to greater efficiency than more firms each producing lower output. microeconomics?

Answer 1

Answer is C : in industries with strong economies of scale, efficiency tends to increase as the number of firms increases because firms face more competitors. as firms compete, they will increase output, lowering costs per unit.