Question

Which of the following are examples of economies of scale? (Check all that apply.)

Multiple select question.
Having more negotiating power vis-à-vis suppliers
Employing technology less efficiently
Spreading fixed costs over fewer units
Spreading fixed costs over more units

Answer 1

Economies of scale result in a decrease in the average cost per unit as the quantity of output increases, exemplified by increased negotiating power with suppliers and the ability to spread fixed costs over a greater number of units.

Step-by-step explanation:

The concept of economies of scale refers to the situation where the cost per unit of production decreases as the scale of production increases. This happens due to various factors, including the ability to spread fixed costs over more units and increased negotiating power with suppliers which can reduce variable costs. Examples of economies of scale include having more negotiating power vis-à-vis suppliers and spreading fixed costs over more units. Economies of scale are crucial in sectors like the chemical industry and airplane manufacturing, where scaling up production can substantially decrease the average cost of output.