What are economies of scale? What is the main source of economies of scale?
What will be an ideal response?
Economies of scale are when a firm increases its plant size and labor employed by the same percentage and its output increases by a larger percentage so that its average total cost decreases. Economies of scale result because of specialization. When a firm increases its capital stock, the capital can be more specialized and hence produce more output than less specialized, more generalized capital. Similarly, when a firm increases its labor force, it can hire more specialists, each of whom is better at doing his or her assigned task than a less specialized individual. As a result of specialization, the firm's average product increases so that its average total cost decreases.
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What short-run choice does the Phillips curve illustrate?
a. The choice between higher real wages and higher output b. The choice between cyclical unemployment and frictional unemployment c. The choice between a higher capital stock and inflation d. The choice between higher output per capita and maintaining the natural rate of unemployment e. The choice between unemployment and inflation
There is a possibility that a national sales tax will be implemented. Many economists argue that items such as food and clothing should be exempt from such a tax because low-income people spend a greater percentage of their income on these goods than do high-income individuals. This argument is motivated by concerns over
A. efficiency. B. economic growth. C. economic stability. D. equity.