GENERAL KNOWLEDGE

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.

Detailed explanation-2: -The long run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas in the short run firms are only able to influence prices through adjustments made to production levels.

Detailed explanation-3: -When a firm’s profits increase, it’s more motivated to produce output (goods or services), since the more it produces the more profit it will earn. So, when costs of production fall, a firm will tend to supply a larger quantity at any given price for its output.

Detailed explanation-4: -VAP is essentially any process that creates a product into a more valuable product. For example, a tomato farmer can turn her tomatoes into tomato sauce and sell it at a higher price.