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    Question

    Process by which cost of unit production is reduced with increase in the units produced, is called?

    A Leverage Correct Answer Incorrect Answer
    B Diminishing marginal utility Correct Answer Incorrect Answer
    C Economies of scale Correct Answer Incorrect Answer
    D Improve market efficiency Correct Answer Incorrect Answer
    E Economies of efficiency Correct Answer Incorrect Answer

    Solution

    When more units of a good or a service can be produced on a larger scale, yet with (on average) fewer input costs, economies of scale (ES) are said to be achieved.  Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs; i.e. the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are spread out over a larger number of goods.

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