Under economies of scale, how does price per square foot typically change as building size increases?

• A. Decreases
• B. Increases
• C. Stays the same
• D. Fluctuates randomly

Answer: (A)

Economies of scale mean that as the size or output increases, the average cost per unit falls. In building projects, fixed costs such as design, permitting, financing, and project management get spread over more square feet, and bulk purchasing plus more efficient construction methods reduce the cost per square foot. So, as building size grows, the price per square foot typically declines. There can be limits where coordination and complexity raise costs, but the usual pattern is a downward trend. The other options don’t fit this effect: the cost per square foot wouldn’t stay exactly the same, rise, or fluctuate without a systematic link to scale.