Question

Charles owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to produce each bottle of water:

Answer 1

Answer:

Cost of each bottle of water is $7.

Explanation:

This is the case for economies of scale. When Charles produce 1 bottle of water, it costs him $1 per bottle, when 8 bottles are produced it costs him  $7. The cost per bottle of water reduces as units increases.