In the long run, if a very small factory were to expand its scale of operations it is likely that it would initially experience ?
Correct answer: C. economies of scale
- A. an increase in average total costs
- B. diseconomies of scale
- C. economies of scale
- D. constant returns to scale
Explanation
A very small factory can usually lower its average cost by expanding and spreading fixed costs over more output, producing economies of scale. Diseconomies generally arise only after the firm becomes excessively large.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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