67. Which of the following points to a reduction in the average cost of a unit produced as production output increases?
Answer: C
Economies of scale
A reduction in the average cost of a unit produced as production output increases is known as economies of scale. This concept indicates that as firms produce more units, the cost per unit decreases due to various factors such as operational efficiencies and bulk purchasing.
A) Best operating level
The best operating level refers to the optimal point of production where a firm operates most efficiently. While it relates to production efficiency, it does not specifically address the reduction in average costs as output increases, making it incorrect in this context.
B) Diseconomies of scale
Diseconomies of scale occur when the average cost per unit begins to increase as production output rises, often due to inefficiencies that arise from over-expansion. This is the opposite of what the question is asking, thus this option is incorrect.
C) Economies of scale
Economies of scale directly refer to the phenomenon where the cost per unit decreases as production output increases. This occurs due to factors such as better utilization of resources, bulk buying, and enhanced production techniques, making this option the correct answer.
D) Focused factories
Focused factories are production facilities designed to concentrate on a specific line of products or services. While they can achieve efficiencies, the concept does not inherently imply a reduction in average costs with increased output on a broader scale, rendering this option incorrect in relation to the question.
Conclusion
Economies of scale is the only option that accurately describes the relationship between increased production output and reduced average costs. Other options either misinterpret the concept or address related but distinct ideas, affirming that economies of scale is the definitive answer to the question posed.