Practice question · Multiple choice
A firm doubles output and total cost rises from 100k€ to 180k€. What does this reveal?
Hints
- Compare cost per unit before and after.
- Doubling output while cost grows only 80% means each unit now costs…
Show the answer
C. Economies of scale: average cost fell
Why
Cost per unit fell from 100k/q to 180k/2q = 90k/q, a 10% drop in average cost. Less-than-proportional cost growth is the definition of scale economies.
Practise Cost Structures
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