Question

The United States and the European Union are groups of semi-independent states that have come together under an agreement whereby resources can travel freely across borders and a common currency is in use. Which of the following statements best explains how this allows for the achievement of economies of scale?

A) Each state or country can now target larger markets and can thus earn more export revenue.
B) States and countries no longer have to worry about borders impeding trade.
C) Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.
D) The removal of trade borders and a common currency enhances trade between member states.

Answer 1

The correct answer is letter "C": Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.

Step-by-step explanation:

Economies of Scale mean output becomes more efficient as the number of goods produced increases. In certain cases, businesses that reach economies of scale, by rising production, lower the overall cost of their goods. This is because fixed costs are distributed across a large number of products that are required to produce a good.

Therefore, states in the U.S. or countries in the European Union can achieve economies of scale by mass-producing goods while reducing unitary costs of output.

Answer 2

C. Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production.

Step-by-step explanation:

Typically explained, Economies of scale (EOS) are the advantages or benefits a firm achieves due to increase in production or operation which in turn leads to decrease in per unit costs.

Here in this question, it is evident that the only way economies of scale could be achieved is by increasing the large scale production techniques that leads to lower per-unit costs of production for the firms.

Hope this clear things up.

Thank you.