Question

At a bakery, which of the following operating characteristics might result in economies of scale? A Each oven requires one worker attending to it. B Two ovens can produce twice as many cakes as one oven. C A giant mixing container costs twice as much to operate as a small one but can mix 6 times as much dough daily. D Each cake produced uses the same amount of ingredients.

Answer 1

Answer:

C. A giant mixing container costs twice as much to operate as a small one but can mix 6 times as much dough daily

Explanation:

Economies of scale refers to a state when increase in the output results out of lower average costs. The operation of such a phase results out of, the total cost getting spread over large number of units of production in the long run.

Economies of scale results when the operations of a business expand due to which a firm can buy in bulk, avail more discounts and concessions from the seller for inputs and the efficiency of the labor rises.

In the given case, if the bakery decides to purchase a giant mixing container, it might lead to economies of scale given the fact, with respect to costs, the revenues shall rise more.

Since the giant mixer is capable of mixing six times as much dough daily, it would lead to a reduction in the average cost accompanied by an increase in the output and thereby lead to economies of scale.