In which scenario can economies of scale typically occur?

Economies of scale occur when a firm's production becomes more efficient as it increases output, resulting in a decrease in the average cost per unit. This phenomenon often arises due to several factors, such as the ability to purchase inputs in bulk at lower prices, spreading fixed costs over a larger number of goods produced, and improvements in operational efficiency as production levels rise.

Increased production can lead to specialization among workers, allowing them to become more skilled and efficient in their tasks, which further contributes to reducing costs. Additionally, larger production volumes may enable businesses to invest in more advanced technology, which can enhance productivity.

The other scenarios presented do not accurately reflect conditions under which economies of scale would typically arise. For instance, decreasing production scale would generally lead to higher average costs, as fixed costs would be distributed over a smaller volume of output. Keeping all factors constant would not allow for the variations needed to achieve efficiencies associated with larger production. Finally, while recessions can impact production levels, they are not a necessary condition for the occurrence of economies of scale. Instead, these effects relate more to the phases of economic cycles rather than the fundamental dynamics of production efficiency related to output levels.