Asked by Jessie Mebane on Sep 24, 2024
Verified
As a table manufacturing company produces more tables,the average total cost of each table produced increases.This could be because:
A) Total fixed costs are decreasing as more tables are produced
B) There are economies of scale
C) There are diseconomies of scale
D) Total variable cost is decreasing as more tables are produced.
Economies of Scale
The cost advantages that enterprises obtain due to their scale of operation, with costs per unit of output generally decreasing with increasing scale.
Diseconomies of Scale
A situation in which a business's costs per unit increase as the scale of operation expands, opposite to economies of scale.
Average Total Cost
The total cost of production divided by the quantity of output produced, representing the cost per unit of output.
- Examine the effect of returns to scale on average costs in the long run.
- Interpret the relationship between economies of scale, diseconomies of scale, and long-run cost curves.
Verified Answer
EG
Eloise Goddard3 days ago
Final Answer :
C
Explanation :
This phenomenon is known as diseconomies of scale, where the average total cost of production increases as the output level increases. This could be due to factors such as an increase in coordination and communication cost, a decrease in the efficiency of labor, or the need for additional equipment and resources to maintain the level of production.
Learning Objectives
- Examine the effect of returns to scale on average costs in the long run.
- Interpret the relationship between economies of scale, diseconomies of scale, and long-run cost curves.