Question

If an industry is characterized by economies of scale then _________.

• A. barriers to entry are not very large
• B. long-run unit costs of production decreases as the quantity the firm produces increases
• C. capital requirement are small due to the efficiency of the large scale operation
• D. the costs of entry into the market are likely to be substantial

Answer 1

The correct option is B long-run unit costs of production decreases as the quantity the firm produces increases

In microeconomics, economics of scale are the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer's average cost per unit to fall as the scale of output is increased. "Economics of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.