Asked by Marisa Mckay on Jul 30, 2024
Verified
If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower long-run average cost than two smaller firms.
Economies of Scale
The cost advantage achieved by an increase in production, leading to a reduction in expenses per unit due to more efficient use of resources.
Long-Run Average Cost
The per-unit cost of production in the long term, where all inputs are variable.
- Comprehend the concepts of economies of scale and their impact on production costs.
Verified Answer
ZK
Zybrea KnightAug 05, 2024
Final Answer :
True
Explanation :
Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale. Therefore, one larger firm can often produce goods more efficiently and at a lower long-run average cost than two smaller firms, due to factors like better utilization of production facilities, spreading fixed costs over more units of output, and stronger bargaining power with suppliers.
Learning Objectives
- Comprehend the concepts of economies of scale and their impact on production costs.
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