What does the expression 'economies of scale' pertain to?

Question

1. The total cost of the project is reduced by the addition of very efficient processes.
2. The development cost is spread over a large number of items, thus the cost per item is less.
3. The project is a large scale project offering many opportunities for cost reduction.
4. none of the above

so if Economies of scale allow sharing development cost over a longer period of production run and cheaper mass production. Thus, the cost per item decreases greatly as the number of items increases.
would that be 4 because the others does not make sense? What do you think?

Answer 1

Best Answer - Chosen by Voters

By convention, the expression 'economies of scale' refers to the reduction of average fixed cost over a large volume of output. Therefore, the answer is number 2.

Be careful, though. The total cost per item will not be reduced indefinitely over an infinite volume of output. There are also diseconomies of scale to be considered when output volumes start to outrun the capacity of a process, or if they require greater input of raw materials than can be obtained at reasonable prices.

OK?