What could happen if ABC grows too fast in production?

• A. If output rises, fixed costs can be spread over more units, lowering average costs, though inefficiencies may appear if growth is too fast.
• B. Output increases do not affect average costs.
• C. Efficiency never changes with scale.
• D. Fixed costs per unit rise as output increases.

Answer: (A)

As production grows, fixed costs can be spread over more units, which tends to lower the average cost per unit. But expanding too quickly can create inefficiencies—coordination problems, strained management, bottlenecks in supply, and quality issues—that raise average costs again. So the strongest statement recognizes both effects: growth can reduce average costs by spreading fixed costs, yet very rapid growth can bring inefficiencies that push costs up. The other ideas don’t fit: average costs do change with output because fixed costs are spread, efficiency can change with scale, and fixed costs per unit fall, not rise, as output increases.