Question

The firm's cost of sales (COGS) can be low when it can purchase its inputs at a lower cost than competitors and/or run its production process more efficiently. This is generally the case when a firm has a _________________

Answer 1

A firm has economies of scale when its cost of sales (COGS) is low.

Step-by-step explanation:

The firm's cost of sales (COGS) can be low when it can purchase its inputs at a lower cost than competitors and/or run its production process more efficiently. This is generally the case when a firm has economies of scale.

When a firm experiences economies of scale, the cost per unit of output decreases as the quantity of output increases. This means that a larger factory can produce at a lower average cost than a smaller factory. Warehouse stores like Costco or Walmart are examples of businesses that benefit from economies of scale.

In summary, when a firm has economies of scale, it can purchase inputs at a lower cost and operate its production process more efficiently, resulting in a lower cost of sales.