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:

Profit-Maximizing

A strategy or process by which a business seeks to generate the highest possible profit from its operations, often by adjusting prices, output, or production methods.

Marginal Cost

The increase in cost resulting from the production of an extra unit of a product or service.

Markup

The difference between the cost of a product or service and its selling price, expressed as a percentage of the cost.

Marginal Cost

The additional total expense incurred from producing one more unit of a product or service.