Module 08 Exam
1 answer:
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Answer:
Costs go down
Explanation:
In Microeconomics, economies of scale can be defined as cost reductions or cost advantages that arises when a business entity is increases its production or are large in size.
This ultimately implies that, when an organization chooses a convenient scale of operation or reduce its scale of production, this would lead to a reduction in the cost of production and consequently, some benefits such as lower long-run average cost, increased sales, profits and lower cost price for the consumers of these finished products.
Furthermore, economies of scale is evident when employees are able to specialize in a specific task. This is so because having a good number of professionals and experts would increase the level of production or output, as they are quite conversant with the best method of production, time management and efficiency.
Average Total Cost (ATC) can be defined as the overall cost of production divided by total output of production. It is calculated by dividing total cost by total output of production or by adding TVC and TFC.
Generally, the shape of the average total cost (ATC) for a firm experiencing economies of scale is horizontal and downward sloping.
This ultimately implies that, for the average total cost curve of a firm with economies of scale, the costs go down as output increases.