If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week, why isn't it also lower when Argyle produces 4,000 sweaters per week

The reason why  the average cost of producing sweaters is not lower when Argyle produces 4,000 sweaters per week is due to Economies of scale.

When a company produces goods  in larger quantity the average cost of producing will be lower reason being that both fixed cost and variable cost are often extended over a large amount of goods produced.

While on the other hand goods produce in small quantity will have a higher average cost.

Therefore the higher the goods produce the lesser the average cost and the lesser the goods produce the higher the average cost of production.

Learn about economies of scale here: link

The reason for this difference is due to the fixed costs of Argyle.

Explanation:

Within the relevant range of production, the fixed costs of Argyle remain fixed in total but vary per unit.  This implies that when Argyle produces 6,500 sweaters per week, its unit cost per sweater will be lower than when it produces 4,000 sweaters for the same period.  The 6,500 sweaters share in the total costs and each unit will get a lower share than when the same costs are shared among 4,000 sweaters.

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