When a firm experiences economies of scale when a firm experiences economies of scale, a. increasing output will lead to lower average costs..'

A) Increasing output will lead to lower average costs

Explanation:

Economics of Scale:

Refers to the idea of "As the output quantity production increases, the long run average cost per unit decreases".

Example:

Company A is large and produces 2 million perfumes per week and company B is small and produces 5 thousand perfumes per week. The average cost of producing 1 perfume for company A will be much lower than that of company B. This is due to

a) Buy in bulk (company A buys more that's why it costs less)

b) Technological aspect ( Company A uses more cost effective methods of production)

c) Managerial expertise

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