Which of the following is correct concerning reactions to INCREASES in activity? Total Variable Cost Variable Cost Per Unit A) I
1 answer:
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Answer: Economies of Scale
Explanation:
Economies of scale refers to the tendency of costs to reduce per unit as the number of units produced increases. This is because the producer is able to share the costs amongst all the units produced.
George was getting those ingredients to make a single burger so the produce he used were small in quantity and cost him more. The companies that make sandwiches in large numbers buy and produce the ingredients in bulk which reduces their prices.
For example, George went to Minneapolis to get salt for one burger, those companies would go and get salt for 10,000 burgers at the same time which would reduce the cost by dividing it across the 10,000 burgers.
This cost saving from economies of scale enables the local deli to sell products at a cheaper rate than if we had to make them ourselves.
