Which of the Following Explain Why Cost Reduction Occurs in the Context

question 10

Multiple Choice

Which of the following explain why cost reduction occurs in the context of scope economies?

• A) high production volumes.
• B) high production volumes and similarities in the resource requirements for different products.
• C) high production volumes and the tendency of the firm to fully exploit its existing resources.
• D) similarities in resource requirements for different products, as well as the tendency of the firm to fully exploit its existing resources.

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Definitions:

Law of Demand

The principle that there is an inverse relationship between the price of a good and the amount of it consumers are willing to buy, all else being equal.

Income Effect

How an individual's or an economic system's revenue shift affects the demand level for a particular good or service.

Substitution Effect

The economic principle that as the price of a good or service rises, consumers will replace it with cheaper alternatives, affecting the demand for goods.

Normal Good

A Normal Good is a type of good for which demand increases as the income of consumers increases and decreases when consumer income decreases, all else being equal.