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A firm finds that producing 30,000 vases costs $180,000 while producing 40,000 vases costs
$ 200,000. This pattern might be explained by:
A. diminishing marginal productivity.
B. economies of scale.
C. diseconomies of scale.
Answer: B
Economies of scale imply that average total cost declines as output increases in the long- run. In this example, average total cost falls from $6 to $5 when production increases by 10,000 vases. It could have been caused by increasing marginal productivity if this were the short run, but that is not given as an option.

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