Which of the following is true of economies of scale? Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the short run only. Increases in the average total cost of producing a product as the firm expands the size of its plant (its output) in the short run only. Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run. Increases in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

Question

Shelby Abbott

Business

20 August, 15:37

Which of the following is true of economies of scale? Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the short run only. Increases in the average total cost of producing a product as the firm expands the size of its plant (its output) in the short run only. Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run. Increases in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

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Answers (1)

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Tara · Answer 1

Reductions in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run.

Explanation:

Economies of scale is a term related to microeconomics which defines the cost advantage realized on increasing units of output by decreasing cost per unit, with the increasing quantum of activity.

Thus, in the long run when average total cost of production, tends to decrease with the increase in output, it is referred to as economies of scale.

It cannot be achieved in short run as the effects will not last long run then, therefor, correct option is reduction of average cost in long run.