Question

A cell phone manufacturing firm produced 1,000 cell phones a day but believed that it could reasonably step up production to 2,000 cell phones a day. Consequently, it built a larger plant and installed efficient machinery and work arrangements to realize the projected output. Which of the following can most likely be inferred from this information?a. the unit cost of producing 2,000 cell phones per day would be twice that of the unit cost of producing 1,000 units per day
b. a production plant with the capacity of producing 5,000 cell phones a day would be most efficient
c. the unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day
d. a 2,000-capacity production plant would be less efficient because of increasing diseconomies of scale
e. the fixed costs of the firm are more likely to increase with the increase in output

Answer 1

Answer:

The answer is: C) The unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day

Explanation:

Economies of scale refers to diminishing unit costs as production levels increase.

As the company's production level increases from 1,000 cell phones a day to 2,000, economies of scale are achieved if the unit cost of producing one cell phone decreases.