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14 January, 13:48

Steve owns a bike store. He currently sells 1,200 bikes per year. If he doubles the size of his store so he can sell 2,400 bikes per year and his long-run average total cost per bike decreases, we know that Steve is experiencing:

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  1. 14 January, 14:02
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    Answer: Economies of scale

    Explanation:

    Economies of scale is the saving in costs that is gained by an increase in the level of production. Economies of scale exist when there is an expansion in a firm's production thereby leading to a decrease in the firm's long-run average costs.

    A reason for economies of scale is due to specialization of labor and machinery. An increase in sales of bikes from 1200 to 2400 with a lower long run average cost shows that there's economies of scale.
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Home » Business » Steve owns a bike store. He currently sells 1,200 bikes per year. If he doubles the size of his store so he can sell 2,400 bikes per year and his long-run average total cost per bike decreases, we know that Steve is experiencing:
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