Question

Annabelle owns an Italian ice shop. If she decided to expand the size of her shop so that she could sell more Italian ices, how would she know if she is experiencing economies of scale in the long run

Answer 1

Answer:

her long-run average cost of selling each Italian ice decreases.

Explanation:

Economies of scale is when a firm produces more units of goods or services on a much larger scale, with very little input cost(average cost). Invariably, this implies that the production units of a firm increases as it grows while having a decreased input costs.

A firm will experience economies of scale in the long run if it's average total costs(cost per unit required for production which remains the same irrespective of output) decreases as it increases its scale of production.