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Cambridge IGCSE Economics practice

What happens to average costs when a firm experiences economies of scale?

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Firms

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What happens to average costs when a firm experiences economies of scale?.

  1. A.They increase
  2. B.They decrease
  3. C.They remain the same
  4. D.They fluctuate

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Paper 2 structured question: Firms

Paper 2Structured Questions1 marks

Description

Impact of Scale on Production Costs

As the firm increased its production, it noticed a decrease in average costs due to bulk purchasing and improved labor specialization. However, after reaching a certain production level, the firm began to experience delays in communication and management issues.

  1. a

    State one internal economy of scale that the firm experienced.

    Aim for approximately 1 distinct marking point.

    [1]