Question

Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $1/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be:

Answer 1

Answer:

Less than $1/unit

Explanation:

The reason is that the company will further gain economies of scale and the cost of production of a unit product will fall below $1 per unit. So this will give a strengthening position to Round Things Inc. and help it to win the market on the basis of quoting the least price due to increased production and economies of scale.