Question

A decrease in the long-run average total cost as output increases is due to rev: 06_26_2018 Multiple Choice the law of diminishing returns. externalities. economies of scale. a declining average fixed cost.

Answer 1

Answer:

The correct answer is economics of scale.

Explanation:

Economies of scale can be defined as the cost advantage experienced by the firms when they increase their output level. As the cost of production gets spread over a large quantity of output the average cost declines.  

These costs can be both variables as well as fixed. Economies of scale can be both internal as well as external.  

Size of business affects the economies of scale, larger the firm the more will be savings on cost.