Question

If it would reduce its average total cost, do you think that a firm should consolidate production by shutting down two plants and shifting production into another plant that would be expanded to increase its scale of production?

Answer 1

It can actually be mentioned that one should actually consider the cost of shutting down to plants and consolidating it to one plant will the increase in space in the shifting or struggles of a considered and it is very high, fixed cost would be high and this also increases the average total cost to a certain extent, and that is the reason why one has to consider the difference in the variable cost and the scale of production and one is thinking for long-term production level, then it can be mentioned that it can be consolidated as it would cover up all the fixed costs in the meantime.