Economies of Scale Occur When

question 211

Multiple Choice

Economies of scale occur when

• A) a firm's long-run average total costs fall as it increases the quantity of output it produces.
• B) the marginal product of labour is greater than the average product of labour.
• C) short-run marginal cost falls.
• D) the demand for a firm's output increases.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, typically because consumers will choose higher quality substitutes when they can afford them.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period, typically showing a downward slope from left to right.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the good's sensitivity to price changes.