Understanding Economies of Scale

What is the primary reason that unit costs decrease as firms expand production?

• Increased production costs

• Decreased demand

• Higher selling prices

• Increased efficiency and output

What does the long run average cost curve represent for a business?

• Fixed costs over time

• Variable costs in the short run

• Different levels of capacity and efficiency

• The maximum production output

How can a business identify if it is achieving economies of scale?

• By increasing production costs

• By maintaining constant output levels

• By reducing unit costs and expanding output

• By moving to the upward sloping part of the LRAC curve

Which of the following is an internal factor that can help a firm achieve economies of scale?

• Increasing market competition

• Merging with another company

• Investing in new technology

• Changes in industry regulations

What is the minimum efficient scale for a business?

• The lowest level of output with the lowest unit costs

• The maximum output a business can produce

• The point where production costs are highest

• The average output level over time