When There Are Economies of Scale, Larger and Fewer Firms

question 182

True/False

When there are economies of scale, larger and fewer firms bring cost efficiencies even as they reduce price competition.

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Definitions:

Total Cost

The sum of all costs incurred by a business in the production of goods or services, including fixed and variable costs.

Prospective Sales

Forecasted or anticipated sales based on current trends, marketing strategies, and economic conditions.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the cost per unit of output decreases with increasing scale.

Diseconomies of Scale

A condition where a firm experiences increasing production costs and decreasing returns as it becomes too large.