Question

In: Economics

Economies of scale: Exist when larger firms can produce at lower cost than smaller firms. Exist...

  1. Economies of scale:
    1. Exist when larger firms can produce at lower cost than smaller firms.
    2. Exist when Average costs go down as production increases
    3. Are more likely to exist in industries with larger fixed costs
    4. All of the above

  1. True or false. Monopolies are always a bad way to deliver goods and services.

  1. An industry that has a few large firms that own a majority of the market share is called
    1. A monopoly
    2. An oligopoly
    3. A monopolistic competition
    4. Perfectly competitive

  1. An attribute of destructive competition is:
    1. Firms earn 0 profit
    2. Quality tends to suffer
    3. Firms are forced out of the industry
    4. All of the above

Solutions

Expert Solution

1.

Economies of scale refer to the cost advantages by a firm when production becomes efficient. A firm can achieve economies of scale by increasing production and lowering costs.

Thus, Economies of scale can any size of the firm - small or longer and exists when the Average costs do down as the production increases.

Note that, although one firm might be able to produce at a lower cost compared to another firm that might not mean economies of scale. Economies of scale exist only when a firm's cost decreases as the firm increases the quantity of production over time.

Option B is the correct answer.

2.

False, Monopolies are some time a good way to deliver goods and services. e.g. the scarce natural resource is fully controlled by the government and thus used and distributed optimally among different producers.

3.

An industry with a few large firms that own a majority of the market share is called Oligopoly. In the case of Oligopoly, the industry is dominated by a small group of sellers (large).

Option B is the correct answer


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