Question

Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $1/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be:__________.

A. $1/unit

B. Less than $1/unit

C. Greater than $2/unit

D. Greater than $1/unit but less than $2/unit

Answer 1

Answer:

B. Less than $1/unit

Explanation:

Base on the scenario been described in the question, the long run average total cost will be less than one dollars, because as it doubt is production using all inpute the average total cost is decreasing , that's why it reduced from $1 to less than $1 .

economies of scale are the cost advantages that enterprises get due to their scale of operation normally calculated by the amount of output produced, with cost per unit of output decreasing with increasing scale