Question

Which of the following least likely describes a firm that is experiencing economies of scale?

Select the correct answer below
A) A firm produces hand-painted plates. The firm has no fixed costs, any worker for the firm takes the same amount of time to paint one item regardless of how many items they paint, and the firm cannot receive any discounts for ordering raw materials in bulk.
B) In order to manufacture its product, a firm must purchase one very expensive piece of equipment. Once it has that piece of equipment, the firm can produce as much of the product as it wants at almost no additional cost.
C) As the number of workers at a firm increases, the firm has almost unending opportunities to further specialize the tasks its workers complete, and in each case specialization leads to greater efficiency
D) In order to supply a utility to a house, a utility company must connect the house to some part of its existing infrastructure

Answer 1

The firm least likely experiencing economies of scale is the one producing hand-painted plates because its production costs remain constant regardless of output, and it does not enjoy volume discounts or technological efficiencies.

Step-by-step explanation:

The option that least likely describes a firm that is experiencing economies of scale is:

A) A firm produces hand-painted plates. The firm has no fixed costs, any worker for the firm takes the same amount of time to paint one item regardless of how many items they paint, and the firm cannot receive any discounts for ordering raw materials in bulk.

Economies of scale are characterized by the reduction in the cost per unit as the quantity of output increases. They can result from factors such as volume discounts on raw materials, technological advancements, and improved efficiency due to specialization and the use of more efficient production technology. The hand-painted plates firm described in option A does not benefit from these factors because its production costs do not decrease with an increase in production, it lacks the opportunity for discounts on materials, and it does not employ any technologies or methods that would lower costs at higher outputs.