Question

True or false: economies of scale exist when expansion of the scale of production causes total production costs to increase more than proportionately to output, which causes long-run average costs of production to increase.

Answer 1

It s true that expansion of the production scale causes an proportional improvement in total production costs and because of this the long run average and production cost decreases. Economies of scale are divided as internal which is result due to expansion of the individual firm and external econ0omies results due to expansion in whole industry.