Question

''Because of economies of scale, it is something more cost effective for a firm to operate a larger plant at less than maximum efficiency than small plant at maximum efficiency''. Do you agree with this statement? if so explain

Answer 1

I agree with this statement, but it can be applied only in some cases, and not a priori. The scale effect is an increase in the efficiency of production with an increase in the size of the enterprise, manifested in a reduction in costs in the production of each new unit of output.