Question

Most manufacturing industries have an optimum plant size. Bigger leads to increased costs per unit, and smaller leads to increased costs per unit (no economies of scale). This can be explained by:
Select one:
a. the long-run average cost curve being U-shaped
b. too small means more overhead costs spread over fewer units of output
c. short-run cost curves being U-shaped
d. all the answers listed
e. bureaucracy eventually taking root (too many paper pushers per unit if output)

Answer 1

In the scenario above, it can be explained by the long-run average cost curve being U-shaped.

What leads to economies of scale?

Economies of scale is known to be a kind of cost benefit gotten by companies if production is said to be very efficient.

Note that the long run average cost curve is seen in a U shape to show that the average cost at first decreases as a result of  economies of scale and as such, the firm had increasing returns to scale and this is shown by consistent returns as the firm works or functions at its optimal size.

Learn more about Economies of scale from

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