Economics • Economic BasicsEasy
Which of the following describes 'Economies of Scale'?
A. Long-run average total cost decreases as the quantity of output increases✓ Correct Answer
B. Short-run variable costs increase faster than fixed costs
C. Total production costs remain completely constant regardless of output
D. Marginal cost exceeds average revenue at maximum output
💡 Solution & Explanation
Economies of scale describe the microeconomic phenomenon where long-run average total costs decline as production scale and output volume increase, often driven by specialization and bulk purchasing advantages. This principle explains why large firms can often undercut smaller competitors in mature industrial markets.
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