Buffalo Aircraft doubles the amount of all the inputs it uses—the factory doubles in size and twice as many workers are hired. After this expansion, the number of aircraft produced triples. This means that Buffalo Aircraft is experiencing:
a. increasing marginal cost.
b. economies of scale.
c. increasing average total cost.
d. decreasing the average variable cost.

b) economies of scale

Explanation:

Economies of Scale can be defined as the cost advantage enjoyed by a firm or industry when it increases its level of output. The greater the quantity of output produced, the lower the cost of production.

There are two types of economies of scale:

1) Internal Economies of Scale

This type of economies of scale are focused on a firm. Buffalo Aircraft is experiencing this type of economies of scale. An increase in the level of inputs in a firm increases the output and cost of production.

2. External Economies of Scale: This is concerned about the economies of scale enjoyed by a partucular sector or industry in an economy.

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