ECONOMICS
MARKET FAILURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
By putting up long-distance power lines is expensive, power plants are commonly built close toeach community.
|
|
|
Larger communities are cheaper to supply with power than small towns, small communitiestypically lack service.
|
|
|
Bigger power plants produce more power than small ones, a community near the plants risksserious air pollution.
|
|
|
It would cost much more for two companies to offer power within a community, there isusually only one.
|
Detailed explanation-1: -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-2: -When more units of a good or service can be produced on a larger scale, yet with (on average) fewer input costs, economies of scale are said to be achieved. Alternatively, this means that as a company grows and production units increase, a company will have a better chance to decrease its costs.
Detailed explanation-3: -Economies of Scale Definition In short, you get more for your money when your organization achieves economies of scale. So, while you may incur initial extra costs by investing in new machinery, additional labor or more raw materials, you save money on the average cost of each unit you produce (see figure 1, below).
Detailed explanation-4: -Economies of scale means reduction in unit of production. Economies of scale refers to reduced cost per unit that arise from increased total output of a product. Was this answer helpful?