Due Sunday 11.05.17 at 11:00 PM Now assume that you are conside company were lar

Question

Due Sunday 11.05.17 at 11:00 PM Now assume that you are conside company were larger (meaning that it had more capital goods) total fixed cost would increase from $180,000 to $210,000. However, labor costs would decrease because the capital goods that you purchased would reduce your need variable cost would decrease by $5,000 per home, as shown in the table for workers. Therefore, your total Quantity Total Variable Cost Total Fixed Cost Total Cost $155,000 290,000 405,000 540,000 695,000 870,000 1,065,000 $210,000 $210,000 210,000 365,000 210,000 500,000 210,000 615,000 210,000 750,000 210,000 905,000 210,000 1,080,000 210,000 1,275,000 210,000 1,490,000 210,000 1,725,000 210,000 1,980,000 1,515,000 1,770,000 10 In the previous question, you learned that, beyond a certain quantity of homes, it is cheaper to produce with a large company (that is, with more capital goods) than with a small company. When a company can lower its cost per house by acquiring capital and becoming larger, we say that the company is experiencing 6.4. 0 A. Economies ofscope Minimum efficient scale ° 0 B. C. Diseconomies of scale D, constant returns to scale E. Economies of scale

Explanation / Answer

Correct option: (e) economies of scale

Reason: Economies of scale refers to the cost advantages or fall in costs which occur as business scale expands and production increases.

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