n the long run a company that produces and sells popcorn incurs total costs of $1,150 when output is 60 canisters and $1,100 when output is 90 canisters. The popcorn company exhibits a. diseconomies of scale because total cost is rising as output rises. b. economies of scale because total cost is rising as output rises. c. economies of scale because average total cost is falling as output rises. d. diseconomies of scale because average total cost is rising as output rises.

Question

Matteo Hogan

Business

10 September, 20:25

n the long run a company that produces and sells popcorn incurs total costs of $1,150 when output is 60 canisters and $1,100 when output is 90 canisters. The popcorn company exhibits a. diseconomies of scale because total cost is rising as output rises. b. economies of scale because total cost is rising as output rises. c. economies of scale because average total cost is falling as output rises. d. diseconomies of scale because average total cost is rising as output rises.

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Answers (1)

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Nathalie · Answer 1

Option (c)

Explanation:

As per the data given in the question,

A company exhibits economy when average total cost falls as output rises and company exhibits dis economy of scale when total cost rises as output rises.

In case of 60 canisters,

Average total cost = Total cost : output

=$1,150:60

=$19.17

In case of 90 canisters,

Average total cost = Total cost : output

=$1,100 : 90

=$12.22

Which indicates Economies of scale since total average cost decreasing as output increases.