Question

A firm decides to scale back its operations due to projections of slower demand. It will move from a large building to a smaller size office space. It will be paying less in total costs, although its costs per unit of output will be larger. The firm's average cost curve exhibits at these points

Answer 1

Question Options:

constant returns to scale.

diseconomies of scale.

rising fixed costs.

economies of scale.

Answer: ECONOMIES OF SCALE.

Explanation: Economies of scale in business refers to the characteristics of a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit. Here, production is efficient and the best value is received from the resources available thereby making costs per unit of output will be larger.

Answer 2

Answer:

hi your question lacks the required option here are the options

• constant returns to scale.

• dis economies of scale.

• rising fixed costs.

• economies of scale.

Answer : economies of scale

Explanation:

The Firm's average cost curve will exhibit at the point of economies of scale. economies of scale is the advantage enjoyed by business when they scale up (increase their scale of operation ) the advantage is that the cost per unit of production decreased while when the firms scales back ( reduction in their scale of operation the costs per unit of output will be larger.

and this is due to the fact that the total fixed cost remains the same and this will negatively affect the Average fixed cost of the firm The firm scaling back  will find its average cost curve exhibiting itself under the economies of scale.