Question

@happinessbreaksbones @halorazer

Why do producers use the economy of scale theory when they make business decisions?

A. To understand changes in training costs
B. To determine impacts on profit
C. To estimate impacts on currency conversion rates
D. To calculate changes in rental costs

Answer 1

I'm a bit stuck on this question.. But, I found this wonderful explanation of the economy of scale, you should read it:

"Economies of scale: As this firm first begins to grow and open new factories, it becomes better and better at what it is producing, is able to get more output per unit of input, and thus experiences lower and lower average total costs as it grows larger. “Scale” is a synonym for size. The bigger the firm’s size, the lower its costs of production: this is called “economies of scale”. My favorite illustration of the concept of economies of scale is to think about two shoe companies: Nike and Luigi’s Fine Italian Shoes. Nike makes shoes in giant factories in Indonesia, ships them in giant containers to all corners of the world in shipments containing 100,000 shoes each. Luigi makes shoes in his basement in Milan, has two employees, and ships shoes one at a time to customers around Europe. Who will have a lower average total cost of producing shoes? Luigi or Nike? Clearly, Nike has economies of scale, Luigi does not. If Luigi were to grow his business, chances are his average total costs would decline."

from this article that you should read: http://welkerswikinomics.com/blog/glossary/economies-of-scale/

I'm honestly stuck between B and C.
hope this helped :(