The Existence of External Economies of Scale

question 34

Multiple Choice

The existence of external economies of scale

• A) tends to result in large profits for each firm.
• B) may be associated with a perfectly competitive industry.
• C) cannot be associated with a perfectly competitive industry.
• D) tends to result in one huge monopoly.
• E) focuses more on individual firms than the industry as a whole.

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Definitions:

Positively Sloped

Describes a line on a graph that rises from left to right, indicating a positive relationship between two variables where an increase in one variable corresponds with an increase in the other.

Aggregate Supply Curve

A graphical representation of the total amount of goods and services that companies in an economy are willing and able to produce at different price levels.

Price Level

An index of the average prices of goods and services throughout an economy, indicating the cost of living or inflation rate.

Expansionary Gap

A situation where the actual level of output in an economy exceeds the full employment level of output, often leading to inflation.