ECONOMICS
COMPETITION AND MARKET STRUCTURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Costs less per unit to produce an item
|
|
|
Reduces barriers to entry in the market and increases competition
|
|
|
Better quality products are produced
|
|
|
None of the above
|
Detailed explanation-1: -It reduces the per-unit fixed cost. As a result of increased production, the fixed cost gets spread over more output than before. It reduces per-unit variable costs. This occurs as the expanded scale of production increases the efficiency of the production process.
Detailed explanation-2: -Increased profits – Economies of scale lead to increased profits, generating a higher return on capital investment and providing businesses with the platform to grow. Larger business scale – As a business grows in size, it solidifies and becomes less vulnerable to external threats, such as hostile takeover bids.
Detailed explanation-3: -Economies of scale are cost advantages that can occur when a company increases their scale of production and becomes more efficient, resulting in a decreased cost-per-unit. This is because the cost of production (including fixed and variable costs) is spread over more units of production.
Detailed explanation-4: -Economies of scale is an economic term that is also known as diminishing marginal cost. The term implies that the cost per unit of production decreases as the firm enlarges its production. Economics of scale usually occurs when the firm expands its production and the average cost of output starts diminishing.