Answer:
Option (C) is correct.
Explanation:
It was given that pizza industry is under the conditions of monopolistically competitive industry. The firms under monopolistic competitive industry are selling the similar products but these products are not perfect substitutes and the decision made by one firm do not affect directly the decision made by other firms in the industry.
Little Joe's raises the prices by 10%, so as a result demand for his pizza decreases because some of the individuals won't be able to afford that price. Hence, Little Joe's Pizzeria will lose some of its customers.
Final answer:
In a monopolistically competitive market like pizza delivery, Little Joe's Pizzeria will likely lose some of its customers if it raises its prices by 10% while competitors maintain their prices.
Explanation:
In a monopolistically competitive industry like pizza delivery, where Little Joe's Pizzeria operates, firms have some market power due to product differentiation, but there are many close substitutes available. If Little Joe's Pizzeria decides to raise its prices by 10% while all other pizzerias keep their prices the same, it's most likely that Little Joe's Pizzeria will lose some of its customers to competitors.
This outcome is because customers can easily switch to other pizzerias that offer similar products at a lower price. The loss of customers would occur even with differentiated products, as price differences are significant enough to drive consumers to look for alternatives. This tendency aligns with the concept of a firm's perceived demand curve in monopolistic competition, which is downward sloping—indicating that as prices increase, quantity demanded decreases.
Which of the following depreciation methods allocates a varying amount of depreciation each year based on an asset's usage?A) the units-of-production methodC) the double-declining-balance methodB) the straight-line methodD) the annuity method
Answer:
Correct option is (A)
Explanation:
Depreciation is decrease in the value of asset over its useful life. Under, units of production depreciation method, an asset's value is estimated based in its usage or the the amount of units produced by it. During the initial years, asset performs better than later years. So, depreciation expense is higher during initial years and falls considerably during later years.
Depreciation expense or depreciation rate remains same for rest of the options like straight line method. double declining method and annuity method.
The units-of-production method is the depreciation method that allocates a varying amount of depreciation each year based on an asset's usage.
Explanation:The units-of-production method is the depreciation method that allocates a varying amount of depreciation each year based on an asset's usage.
Under this method, the asset's depreciation expense is determined by dividing the asset's cost minus its salvage value by the total estimated units of production over its useful life. The depreciation expense for each year is then calculated by multiplying the depreciation rate per unit of production by the number of units produced in that year.
This method is commonly used for assets that are expected to wear out or become obsolete based on their usage, such as manufacturing machinery or vehicles.
https://brainly.com/question/36468482
#SPJ3
If the Fed announces that it will reduce the growth rate of the money supply to 3% next year but people do not believe it, the Fed is said to_________.
Answer:
money in circulation will reduce by 3%
Explanation:
this mean the Fed will reduce the money in circulation by 3% and this indicates that few money will be available for the purchase of goods in the country.
Your client, Tom, asks you to prepare his financial statements. He is especially curious about his net worth. He asks you to explain to him his current net worth, and show you how it was calculated. Which financial statement or ratio will help you illustrate Tom's net worth?
a. Income Statement Balance
b. Sheet Statement of Net Worth
c. Net Worth to Total Assets Ratio
Answer: Balance sheet
Explanation: In simple words, balance sheet refers to the statement which is prepared by an entity at the end of the financial year for depicting its assets, liabilities and equity in hand at that particular point of time.
Balance sheet shows the net worth of an entity at the end of the year and can also be used to evaluate how much of the assets are funded with the capital and for how much any liability has been taken over.
Thus, from the above we can conclude that the correct answer is balance sheet.
The Balance Sheet, specifically the Statement of Net Worth, will help illustrate Tom's net worth by showing his assets, liabilities, and equity.
Explanation:To illustrate Tom's net worth, you would use the Balance Sheet, specifically the Statement of Net Worth. This statement shows the assets, liabilities, and equity of an individual or business at a specific point in time. It provides information on Tom's total assets and subtracts his liabilities to calculate his net worth.
The formula to calculate net worth is:
Net Worth = Total Assets - Total Liabilities
Therefore, the Sheet Statement of Net Worth will be the most helpful financial statement to explain and calculate Tom's net worth.
Learn more about Statement of Net Worth here:https://brainly.com/question/31885969
#SPJ12
MNOP Inc. declared a $1.00 dividend with a record date of Thursday, September 15, and a payment date of Thursday, October 20. Cheri wants to purchase stock and receive the dividend. What is the latest date that she needs to have purchased the stock in order to receive the dividend?
A. September 12
B. September 13
C. September 15
D. September 19
E. October 18
Answer
C. September 15
Explanation:
since the record date is September 15, She needs to have purchased the stock by September 15 in order to receive the dividend.
According to the model developed by Katz and Kochan, at which level does the management make basic choices such as whether to work with its unions or to devote its efforts to developing nonunion operations?A) Strategic levelB) Corporate levelC) Functional levelD) Production levelE) Business unit level
Answer: Option (A)
Explanation:
Here , from the given options we can state that option (A) is correct. Strategic level under the model which was put forth by Kochan and Katz tends to mostly consists of actions and decisions which are developed by both the unions and the management that are concerned about the values, strategies, structures, and several other features that further affect the bargaining and relations.
At the point where actual inflation is equal to expected inflation
Answer: The short run Phillips curve intersects the long run Phillips curve.
Explanation: The Phillips curve states that unemployment and inflation have an inverse relationship. This means that they move in opposite directions, I.e. If inflation increases then unemployment decreases and vice versa.
In the graph attached the short run Phillips curve is L - shaped and shows the inverse relationship between both variables initially. The long run Phillips curve is a vertical line, and shows that unemployment rate remains steady regardless of inflation rate, in the long term. Where these 2 lines intersect is where actual inflation and expected inflation are the same.
Final answer:
Actual inflation matching expected inflation means that there is no change in purchasing power, as income increases cancel out price increases. This is exemplified by the hypothetical scenario in the Land of Funny Money. Real-world situations often differ because perfect anticipation of inflation is uncommon.
Explanation:
At the point where actual inflation is equal to expected inflation, economic agents' expected prices align with the actual prices in the market. If everyone anticipates inflation correctly, there will be no loss of purchasing power since the percentage increase in prices is equaled by a percentage increase in incomes. An intuitive example of this can be illustrated through the Land of Funny Money where overnight, a 20% increase occurred in all wages, prices, and monetary quantities. Though unexpected, this change had no economic impact because the relative value of goods did not change; hence individuals could purchase the same basket of goods as before.
The relation between inflation and economic outcomes also depends on the position of the economy. If the economy is operating at or near its potential GDP—reflected by an upward-sloping short-run aggregate supply (AS) in its steep range—inflationary pressures will be accompanied by low unemployment rates. In real-world cases, perfect inflation anticipation is rare and deviations can cause wealth redistributions or resource misallocations.
When Douglas, an employee at Donovan Corp., was unable to complete a project on time, his manager, Tyler, assumed that Douglas missed the deadline because he was insincere. Douglas could not meet the deadline because his computer was infected with malware. In this scenario, Tyler's perception of Douglas represents a _____.
A) selective attribution errorB) defensive biasC) self-serving biasD) fundamental attribution error
Answer:
The correct answer is D
Explanation:
Fundamental attribution error is the kind of error where the tendency for explaining the behavior of person grounded on internal factors like disposition or personality and in order to underestimate the influence that external factors like the situational influences.
In this case, an employee who unable to complete the project due to computer got infected but the manager think that Douglas unable to complete the project because he is insincere. So, it represent the fundamental attribution error.
Southwestern Foods Corporation operates a packaging plant near the border between the United States and Mexico. Due to the location, it would be easier for Southwestern to employ non-citizens. With respect to persons not authorized to work in the United States, an employer can:
Answer:
Southwestern Foods Corporation could employ non-citizens as long as they are authorized to work in the US (they have a work permit). Hiring non-citizens who also do not have a work permit is llegal under the Immigration Reform and Control Act of 1986.
Skysong, Inc. sells equipment on September 30, 2019, for $17,400 cash. The equipment originally cost $72,400 and as of January 1, 2019, had accumulated depreciation of $42,300. Depreciation for the first 9 months of 2019 is $5,250. Prepare the journal entries to (a) update depreciation to September 30, 2019, and (b) record the sale of the equipment.
Answer:
Explanation:
The journal entries are shown below:
a. Depreciation Expense A/c Dr $5,250
To Accumulated Depreciation - Equipment A/c $5,250
(Being depreciation expense is recorded)
b. Cash A/c Dr $17,400
Accumulated Depreciation - Equipment A/c $47,550
Loss on Disposal of Equipment $7,450
To Equipment A/c $72,400
(Being sale of machinery is recorded and the remaining balance is credited to the Loss on Disposal of Equipment A/c)
The accumulated depreciation is computed below:
= $42,300 + $5,250
= $47,550
The terms below are measures or individual components of the money supply. Specifically considering the money supply of the United States, rank these items from largest to smallest in terms of dollar value. M2, currency, travelers checks, balances in savings accounts, M1
Answer:
M2 balances in savings accounts M1 currency travelers checksExplanation:
The money supply is the total amount of money available in an economy. It includes:
M1 includes coins and notes (bills) in circulation, travelers' checks and other money equivalents that are easily liquidated.M2 includes M1 plus short term bank deposits (including savings accounts) and 24 hour money market funds.M3 includes M2 plus long term bank deposits and money markets with more than 24 hour maturity.Lois walked into ABC Company to pick up an application for a secretarial job. When she asked about the duties and working conditions, the busy receptionist handed her a document that gave her a clear picture of the position. The receptionist gave Lois a job
Answer:
description
Explanation:
A job description is simply a document that clearly states all the necessary skills and abilities needed to perform a specific job. It should also include the duties and responsibilities that the person hired for that job will be required to do.
Job descriptions can be used externally (e.g. job hiring sites) to attract potential candidates and internally by HRM in the candidate selection process. The job description used by HRM is more complete than the public one and should include performance evaluations, psychological testing, etc.
The beef industry denies that "mad cow" disease is an issue in the U.S., resists increased inspections of cattle arriving slaughterhouses, and calls on cattlemen nationwide to persuade their representatives and senators in Congress to stop legislation to require "tracking" of cattle to their sources. What best describes the industry’s approach?
Answer: Reactive Public Relation
Explanation:
Here, in this particular case we can state that the reactive public relation tends to best describe this approach taken by the industry. Traditionally, the reactive public relation is known to be referred when there is a requirement for crisis management. For several organizations , the known resort still tends to be reactive public relation.
The beef industry's approach includes resistance to regulation, denial of 'mad cow' disease risks in the U.S., and lobbying against cattle tracking to protect economic interests.
The beef industry's approach to resisting increased inspections, dismissing the severity of 'mad cow' disease in the U.S., and lobbying against cattle tracking legislation could best be described as protective of industry interests. This stance is focused on maintaining current business practices, avoiding the potential costs associated with stricter regulations, and influencing governmental policy to safeguard their economic interests. The industry calls upon cattlemen to exercise their political power to prevent legislation that might impose additional costs or restrictions, signaling an active and coordinated effort to shape industry-related policy.
Brandon is an office manager with a college degree, five years of experience, and a track record of being rated excellent at his work. He supervises seven staff members, and his employer, PRF Inc., pays him $40,000 a year. Which comparison would most likely lead Brandon to conclude that his rate of pay is unfair?
Answer:
Brandon needs to compare his salary to other employees of the company, he needs to pay special attention if:
If the supervisors from other departments or units of the same company earn more than Brandon. If his own staff members earn a salary that is very similar to Brandon's. If his immediate superior earns a salary that is disproportionately higher than Brandon's."When aggregate demand increases," A. the price level is likely to fall as GDP rises. B. aggregate supply will shift to the right. C. aggregate supply will shift to the left. D. the price level is likely to rise as GDP rises.
Answer:
D. the price level is likely to rise as GDP rises.
Explanation:
The aggregate demand measures all the goods produced in an economy at a given price in a particular period.
When the aggregate demand increases, the aggregate demand curve shifts to the right. When aggregate demand increases, aggregate demand exceeds aggregate supply and aggregate price and output would increase.
An increase in aggregate demand tends to cause a rise in both the price level and Gross Domestic Product (GDP). Therefore, the correct answer to the student's question would be option D.
Explanation:When aggregate demand increases, the price level is likely to rise as GDP rises. This happens because of the basic law of supply and demand. As demand for goods and services increases, companies can charge more for their products (thus increasing the price level). This simultaneously boosts Gross Domestic Product (GDP), as more goods and services are being sold. So, in this case, the correct answer would be option D.
In contrast, options A, B, and C do not necessarily follow from an increase in aggregate demand. Option A suggests the inverse relationship between the price level and GDP, which is generally incorrect. Options B and C are related to shifts in the aggregate supply, not demand.
Learn more about Aggregate Demand here:https://brainly.com/question/31452265
#SPJ3
Wesimann Co. issued 15-year bonds a year ago at a coupon rate of 7.5 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 5.8 percent, what is the current bond price?
Answer:
$1,161.46
Explanation:
In order to determine the current bond price we can use an excel spreadsheet and the present value formula: =PV(Rate,Nper,PMT,FV)
where:
Nper = 14 x 2 = 28 (15 year bond issued 1 year ago = 14 years)Rate = 5.8% / 2 = 2.9% (semiannual payments) PMT = ($1,000 x 7.5%) / 2 = $37.50 FV = $1,000 (face value of bonds) PV = ?Current price =PV(Rate,Nper,PMT,FV) =PV(2.9%,28,37.50,1000) = $1,161.46
It has been argued that as a result of not producing the quantity of output where unit cost is minimized, the monopolistic competitive firm charges too __________ a price and produces too __________ output.
Answer:
The correct answer is: high; little.
Explanation:
In monopolistic competition, a firm produces at the level of output where the marginal revenue is equal to marginal cost. The firm is able to maximize its profit at this point.
However, the socially optimal level of output is where the price is equal to marginal cost. This level of output is greater than the profit-maximizing level of output and charges a lower price.
But since the firm is a price maker, it produces at the point where MR equals MC. At this point, the price is higher and the output produced is smaller. This creates a deadweight loss in the market.
Anderson Corporation has purchased a group of assets for $16,600.
The assets and their relative market values are listed below.
Land 6,500
Equipment 2,400
Building 3,400
Which of the following amounts would be debited to the Land? account? (Round any intermediate calculations to two decimal? places, and your final answer to the nearest? dollar.)A.$ 3 comma 320$3,320B.$ 4 comma 100$4,100C.$ 8 comma 798$8,798
D. $ 4 comma 648
Answer:
C.$ 8 comma 798$8,798
Explanation:
Given,
Purchase value = $16,600
Considering the relative values
Relative value of land = $6,500
Total relative value = 6500 + 2400 + 3400
= $12,300
Using the relative value to allocate the purchased value of the land
Purchased cost of land = (6500/12300) × 16,600
= 0.53 × 16,600
= $8,798
The amount that would be debited to the Land is $8,798 Option C
When Jane wanted to buy jewelry for her wedding, she decided to purchase it from a store that her mother patronized. She didn't spend any time looking for jewelry in other stores. All that mattered to her was the emotion associated with buying something closely associated with her childhood. Jane's decision is most likely based on:________
Hey! How are you? My name is Maria, 19 years old. Yesterday broke up with a guy, looking for casual sex.
Write me here and I will give you my phone number - *pofsex.com*
My nickname - Lovely
The quantity theory of money is a theory of how A) the money supply is determined. B) interest rates are determined. C) the nominal value of aggregate income is determined. D) the real value of aggregate income is determined.
Answer:
C) the nominal value of aggregate income is determined
Explanation:
The quantity theory of money states that nominal aggregate income is determined by money supply. It is assumed that money velocity is constant in the short run and so would not impact nominal aggregate income.
The quantity theory of money is obtained from the equation of exchange which is:
(Money supply × velocity ) = (price × agregrate output)
Dividing both sides by velocity gives,
Money supply = (1/velocity) × ( price × agregrate output)
It is assumed velocity is constant, therefore,
Money supply = k × (price × agregrate output)
I hope my answer helps.
All the best
A house is constructed in a neighborhood that is substantially larger than the existing houses. Based on the value principle of ___________________, the larger house's value will therefore be adversely affected.
1 - anticipation
2 - conformity
3 - inadequacy
4 - competition
Answer: (2) Conformity
Explanation:
The conformity is one of the principle value and it basically refers to the behavior, attitude and the beliefs for the social and the political group.
The term conformity is basically used to describe the person behavior and also beliefs so that the person are able to fit in the specific groups.
It is the process of matching the norms that are implicit and shared by the individual groups for the interaction and this principle value are adversely affected.
Therefore, Option (2) is correct.
On January 1, 2015, Anna invested $5,000 at 5 percent interest for one year. The CPI on January 1, 2015 stood at 2.37. On January 1, 2016, the CPI was 2.40. The real rate of interest earned by Anna was ______ percent.
a) 9
b) –5
c) 3.7
d) 5
Answer:
The correct answer is c) 3.7 .
Explanation:
The first thing we should do is calculate inflation: (2.40 - 2.37) / 2.37 = 1.3
Inflation Rate = 1.3
2.) Calculate the real interest rate
Real interest rate = nominal interest rate - inflation rate
5 - 1.3 = 3.7
3.7 is the real interest rate
Final answer:
Anna earned a real interest rate of approximately 3.7% on her $5,000 investment after adjusting for an inflation rate derived from the change in CPI from 2.37 to 2.40 during the year 2015. The correct option is c.
Explanation:
The question asks to calculate the real rate of interest earned by Anna on her investment, taking into account the inflation represented by changes in the Consumer Price Index (CPI). On January 1, 2015, Anna invested $5,000 at a nominal interest rate of 5 percent for one year. As per the formula for the nominal interest factor, Anna's investment would be worth: $5,000 × (1 + 0.05) = $5,250 after one year.
To determine the real interest rate, we need to adjust Anna's nominal interest rate by the inflation rate during that year. The inflation rate is derived from the change in CPI from the beginning to the end of 2015: ((2.40 - 2.37) / 2.37) * 100 = 1.27%. The real interest rate is then calculated by subtracting the inflation rate from the nominal interest rate: 5% - 1.27% = 3.73%, which is approximately 3.7%.
Hence, the real rate of interest earned by Anna was 3.7 percent, making the correct answer option (c).
May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in the fourth. Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200, property taxes $9,000, insurance $3,000, utilities $2,000, repairs and maintenance $1,000, depreciation on the entire complex of $5,000, and rental income of $25,000. What amount of net rental income or loss should May report on her current tax return?
Answer:
net income of $3,850
Explanation:
May's income = $25,000
May can deduct 75% of her total expenses since she uses one apartment and rents the other 3.
Total expenses = $8,200 + $9,000 + $3,000 + $2,000 + $1,000 + $5,000 = $28,200
May's deductions = $28,200 x 75% = $21,150
May's net income = $25,000 - $21,150 = $3,850
Cost management of services__________.
a. includes demand management and supplier cost structure analysis.
b. is confined to internal demand analysis and consumption management.
c. is confined to supplier cost structure analysis.
d. focuses primarily on better design of the service.
e. is only possible when the service is highly tangible.
Answer:
The correct option is A
a. includes demand management and supplier cost structure analysis.
Explanation:
Cost management deals with managing the budgets of a businesse. In order to have an effective cost management process, the demand and supply cost structure must be analysed effectively. During cost management, goods that should be purchased should be strategic goods
______ are the three elements of expectancy theory.a.Expectancy,b.institution,c.and varianceExpectancy,d.institution,e.and valuesExpectancy,f.instrumentality,g.and varianceExpectancy,h.instrumentality,i.and valenceExpectancy,j.instrumentality,k.and values.
Answer: expectancy, instrumentality and valence
Explanation: These three elements can be explained as follows :-
1. Expectancy refers to the probability that the activity one is going to perform will eventually lead to good performance.
2. The belief that there is a connection between the activity be performed and the goal that is one willing to achieving is called instrumentality.
3. The degree to which the potential reward from success are valued is called valence.
All of the following are tangible or intangible benefits of a new system except:
A. increased costs
B. increased job satisfaction
C. better decision making
D. greater management control
E. improved customer service
Answer:
A. increased costs
Explanation:
A new system should simplify tasks, improve the speed of delivery and make work more enjoyable. A business invests in a new system with the expectation of enhancing efficiency and reduction in wastage. Although a new system may be expensive to implement in the short-run, it has cost-saving benefits in the long-run.
Increased costs are not a benefit of a new system. Acquiring a new system is costly. To a business, increased costs are a disadvantage, not a benefit. The benefits of a new system outweigh its costs in the long-term.
Increased job satisfaction, better decision making , greater management control and improved customer service are benefits associated with new systems.
Kirksand Airlines is well known for providing excellent customer service to its flyers. The staff members enquire and listen carefully to each flyer's wants and needs. If a flyer has any specific requests, the staff members ensure that they are immediately attended to. In this scenario, Kirksand Airlines has based its customer relationship management on the trend of _____.
A. technology
B. personalization
C. loyalty
D. mass marketing
Answer:
The correct answer is B. personalization.
Explanation:
At present, consumers no longer like the idea of being seen as simple numbers by brands and companies, this implies that those who seek to reach these individuals should work harder to change the way they relate and direct to this, and one of the most effective methods today is through personalization, which implies a better understanding of consumers to become more relevant to them. Salesforce notes that by 2021, 51 percent of consumers would be waiting for companies to anticipate their needs and make relevant suggestions before a contact is established.
Therefore, we can talk about personalization as an increasing tactic, which is being well perceived by businesses and consumers. Particularly in the case of business, the benefits have been significant, Monetate notes that 79 percent of organizations that exceed their revenue goals have a documented personalization strategy.
In an effort to expand its business, music retailer MovNow offers DVD rentals online.
In order to spot trends in consumer interest, MovNow has decided to evaluate the data of the hyperlinks that customers click on when they visit its website.
This is an example of how a company can obtain _____ data.
Answer:
The answer is primary
Explanation:
This is an example of how a company can obtain _primary____ data.In March, stockholders of Herbalife Nutrition approved a 3-for-2 stock split. After the split, how many shares of Herbalife stock will an investor have if she or he owned 400 shares before the split?
Final answer:
After the 3-for-2 stock split, an investor who owned 400 shares of Herbalife stock will have 600 shares.
Explanation:
In March, stockholders of Herbalife Nutrition approved a 3-for-2 stock split. A stock split occurs when a company increases the number of shares outstanding while proportionally reducing the price of each share. In this case, a 3-for-2 stock split means that for every 2 shares an investor owns, they will receive an additional 1 share.
So if an investor owned 400 shares before the split, they would receive 400/2 = 200 additional shares. Therefore, an investor would have a total of 400 + 200 = 600 shares after the stock split.
Final answer:
To determine the number of shares an investor would have after a 3-for-2 stock split, multiply the original number of shares by 1.5. In this case, an investor with 400 shares would end up with 600 shares after the split.
Explanation:
When a company like Herbalife Nutrition performs a 3-for-2 stock split, each shareholder receives an additional half share for each share they own. Therefore, for every two shares owned, the shareholder will have three shares after the split.
To calculate the new number of shares for an investor who owned 400 shares before the split, we use the following calculation:
Determine the ratio of the stock split which is 3-for-2, meaning that for every 2 shares, it becomes 3 shares.
Calculate the multiplier by dividing the number of new shares by the number of old shares (3 divided by 2 equals 1.5).
Multiply the original number of shares (400) by the multiplier (1.5) to find the new number of shares.
Therefore, 400 shares × 1.5 = 600 shares.
After the stock split, the investor will have 600 shares of Herbalife stock.
On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?
A. credit to Cash of $1,000B. credit to Interest Payable of $1,000C. credit to Note Payable of $1,000D. debit to Interest Expense of $6,000
Answer:
C) credit to Note Payable of $1,000,000
Explanation:
The complete journal records for November 1, 2018 are:
Dr Cash account 100,000Cr Notes Payable account 100,000The company received $100,000 in cash. Since cash is an asset and it increased when the bonds were issued, it should be debited.
The company has to pay a note worth $100,000. Since notes payable is a liability and it increased when the bonds were issued, it should be credited.
A statewide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large number of materials ordered. This is an example of the advantage of __________ resulting from an alliance.
a. explicit collusion.
b. distribution opportunities.
c. economies of scale.
d. opportunistic behavior.
Answer:
The correct answer is c. economies of scale.
Explanation:
The situation in which a company reduces its production expenses by expanding is called economy of scale. It is a situation in which the more it occurs, the cost that the company has to manufacture a product is lower.
There is a greater benefit for every extra unit we produce. This reduction in the cost of unit manufacturing is not reduced because the price of raw materials goes down, but to take advantage of a material that we have already bought and in which we invested money in the past.
Therefore, it occurs especially in situations in which the company buys more facilities. If we buy a machinery, the way to take advantage of it is to produce more since it is the way that we get a greater benefit, by taking advantage of the same machinery to produce more products, the unit cost of each product is lower. And we will get more benefit the more we produce. This benefit will be greater since we will not have to increase manufacturing costs since we have already had it before.