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A production process has economies of scale if average total cost decreases as production increases.

A. True
B. False

User Atty
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Final answer:

The statement that a production process has economies of scale if average total cost decreases as production increases is true. A larger scale of production allows for the average total cost to be spread out over more units, making each unit cheaper to produce.

Step-by-step explanation:

The statement 'A production process has economies of scale if average total cost decreases as production increases' is true. Economies of scale occur when a company can reduce its average total cost by increasing the scale of production. This concept is crucial for businesses aiming for efficiency and competitiveness. For example, a larger factory benefits from economies of scale because it can spread the fixed costs of production over a larger number of goods, resulting in a lower cost per unit.


The curve illustrating economies of scale shows a downward slope, indicating that average costs decline as production levels rise, up to a certain point. It's important to note that this applies to the long-run average cost curve where all inputs, such as labor and capital, can be adjusted to achieve a higher scale of operation, as opposed to the short-run average cost curve.

User Jeremy Tammik
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