Question

Which of the following statements about economies of scale is NOT true?

a. One reason economies of scale occur is because employees become more efficient as volume increases.
b. Economies of scale may not exist at all levels of production.
c. One reason economies of scale occur is because fixed costs can be spread over more units of production as output increases.
d. Economies of scale refers to the fact that as volume increases, total cost of production decreases.

Answer 1

The false statement about economies of scale is that it suggests total production cost decreases with an increase in volume, whereas it actually refers to a decrease in average cost per unit. Economies of scale result in cost advantages from increased output and efficiency.

Step-by-step explanation:

The statement about economies of scale that is NOT true is: d. Economies of scale refers to the fact that as volume increases, total cost of production decreases. This statement is incorrect because economies of scale refer to a decrease in the average cost per unit as volume increases, not necessarily the total cost. Economies of scale occur when the cost advantages that a business obtains due to expansion become apparent, often after a certain point of production volume. The correct aspects related to economies of scale are employees becoming more efficient, fixed costs spreading over more units, and the potential absence of economies of scale at all levels of production.