When internal economies of scale occur ?
Correct answer: C. Average costs fall
- A. Total costs fall
- B. Marginal costs increase
- C. Average costs fall
- D. Revenue falls
Explanation
Internal economies of scale reduce a firm's long-run average cost as its scale of production expands. Total cost may still rise because the firm is producing more output, so average cost is the relevant measure.
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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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