When There Are Economies of Scale in Production, What Can

question 1

Multiple Choice

When there are economies of scale in production, what can we conclude?

• A) Marginal cost increases as output expands.
• B) Marginal product of an input diminishes with increased utilization.
• C) Long-run average total cost declines as output expands.
• D) Long-run average total cost increases as output expands.

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Definitions:

Consumer Surplus

The rift between what consumers are economically prepared to spend on a service or product and their actual spending.

Consumer Surplus

The divergence between the total consumers can and are willing to pay for a product or service and what they truly pay.

Binding Price Floor

A government-imposed minimum price set above the equilibrium price, resulting in a surplus by preventing the market price from falling to its natural level.

Willingness To Pay

The maximum amount an individual is prepared to spend to procure a good or service, reflecting the value they place on it.