GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Result from changes in production techniques
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Increase due to the growth of the industry as a whole
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Generate lower per unit production costs
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Reduce production costs in the short run
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Detailed explanation-1: -Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between the per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost.
Detailed explanation-2: -Economies of scale are cost reductions that occur when companies increase production. The fixed costs, like administration, are spread over more units of production. Sometimes, a company that enjoys economies of scale can negotiate to lower its variable costs, as well.
Detailed explanation-3: -Economies of scale occurs when more units of a good or service can be produced on a larger scale with (on average) fewer input costs. External economies of scale can also be realized whereby an entire industry benefits from a development such as improved infrastructure.
Detailed explanation-4: -Economies of scale refer to the cost advantages a company gains with the increase in production. This happens because production costs can now be spread over a large number of goods. The bigger the size of a company, the bigger the more the cost savings with the increase in production.