Question

When firm A produces 100 units of a good, the cost per unit is $7. When it produces 200 units of the good, the cost per unit is $6.50. This firm is experiencing Select the correct answer below: declining costs economies of scale uncertain costs diseconomies of scale

Answer 1

Answer:

economies of scale

Explanation:

Economies of scale happen when the average total cost of producing additional units of output decreases as total output increases. The reason why this happens is that even if variable costs per unit remain the same, average fixed costs per unit decrease as total output increases.