QuestionJuly 13, 2026

Economies of scale are achieved when a firm reduces its average cost of production as it produces more. can be avoided by purchasing supplies and raw materials in large quantities. help explain the success of small businesses. are available to small firms but not to large firms due to management inefficiencies.

Economies of scale are achieved when a firm reduces its average cost of production as it produces more. can be avoided by purchasing supplies and raw materials in large quantities. help explain the success of small businesses. are available to small firms but not to large firms due to management inefficiencies.
Economies of scale are achieved when a firm reduces its average cost of production as it produces more. can be avoided by purchasing supplies and raw materials in large quantities. help explain the success of small businesses. are available to small firms but not to large firms due to management inefficiencies.

Solution
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Answer

are achieved when a firm reduces its average cost of production as it produces more. Explanation 1. Define economies of scale Economies of scale occur when the long-run average total cost of production decreases as the quantity of output increases. The formula for average total cost is ATC = \frac{TC}{Q}. 2. Evaluate the options The first option correctly describes the definition: as output (Q) increases, the cost per unit (ATC) falls. The other options are incorrect because purchasing in bulk is a source of economies of scale, not something to be avoided; they typically favor large firms over small ones.

Explanation

1. Define economies of scale<br /> Economies of scale occur when the long-run average total cost of production decreases as the quantity of output increases. The formula for average total cost is $ATC = \frac{TC}{Q}$.<br /><br />2. Evaluate the options<br /> The first option correctly describes the definition: as output ($Q$) increases, the cost per unit ($ATC$) falls. The other options are incorrect because purchasing in bulk is a source of economies of scale, not something to be avoided; they typically favor large firms over small ones.
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