Question at position 9 When there are economies of scale,A) per-unit costs increase as output increasesB) per-unit costs decrease as output increasesC) per-unit costs are constant as output increasesD) output does not affect per-unit costsClear my selection

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Question at position 9 When there are economies of scale,A) per-unit costs increase as output increasesB) per-unit costs decrease as output increasesC) per-unit costs are constant as output increasesD) output does not affect per-unit costsClear my selection

BlackTom AI · Accepted Answer

Question at position 9 asks about the effect of economies of scale on per-unit costs as output changes. 
Option A: 'per-unit costs increase as output increases' would imply that producing more makes each unit more expensive, which contradicts the core idea of economies of scale. In reality, larger output typically allows cost spreading and efficiency gains, not rising unit costs. 
Option B: 'per-unit costs decrease as output increases' captures the essence of economies of scale. When a firm ramps up production, fixed costs are spread over more units, variable costs may scale more efficiently, and processes or technology can become more productive, leading to lower average costs. This is the classic downward-sloping average cost behavior associated with economies of scale. 
Option C: 'per-unit costs are constant as output increases' describes constant returns to scale, not economies of scale. If costs stayed perfectly the same per unit regardless of output, there would be no cost advantage to increasing production. 
Option D: 'output does not affect per-unit costs' ignores any relationship between scale and costs altogether. That statement contradicts the fundamental idea behind economies of scale, which posits that changing output changes average costs under certain conditions. 
In summary, the reasoning behind economies of scale centers on cost reduction per unit as output rises, due to spreading fixed costs and achieving greater efficiency, while the other options misstate or overlook that relationship.

Question at position 9 When there are economies of scale,A) per-unit costs increase as output increasesB) per-unit costs decrease as output increasesC) per-unit costs are constant as output increasesD) output does not affect per-unit costsClear my selection

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