Josephina Owns a Boxing Gym

question 29

Multiple Choice

Josephina owns a boxing gym.She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients.How would Josephina know if she is experiencing economies of scale from increasing the size of her boxing gym?

• A) Her average cost per client increases.
• B) Her total cost increases.
• C) Her average cost per client remains the same.
• D) Her average cost per client decreases.
• E) Her total cost remains unchanged.

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Definitions:

Short Run

A time period in which at least one input is fixed and cannot be changed by the firm, affecting its production decisions.

Purely Competitive Market

Another term for a perfectly competitive market, emphasizing its features like a large number of small firms and identical products.

Marginal Revenue

The increased earnings resulting from the sale of one extra unit of a good or service.

Marginal Cost

The increased cost resulting from the production of an additional unit of a good or service.