Final answer:
An increase in a firm's operations, when experiencing economies of scale, results in a decrease in average total cost, which is the opposite in the case of diseconomies of scale.
Step-by-step explanation:
When a firm experiences economies of scale, an increase in the size of its operations will lead to a decrease in average total cost. This is because as the quantity of output increases, the cost per unit goes down.
This principle is illustrated by large 'warehouse stores' like Costco or Walmart, where a larger scale can produce goods at a lower average cost than their smaller counterparts. On the other side of the spectrum, there are diseconomies of scale, where very large firms may face increased costs due to challenges in management and communication, leading to inefficiencies.