There are scale economies in the production of electricity from wind because electricity can be generated from

Question:

There are scale economies in the production of electricity from wind because electricity can be generated from turbines of different sizes. Although large wind turbines are more costly than small ones, the higher cost is more than offset by greater generating capacity. The scale economies occur because the cost of purchasing, installing, and maintaining a wind turbine increases less than proportionately with the turbine s generating capacity. Table shows the costs of a small turbine (150-kilowatt capacity) and a large turbine (600-kilowatt capacity), each with an assumed lifetime of 20 years.
The large turbine has four times the generation capacity of the small turbine 20 million kilowatt hours versus 5 million kilowatt hours but its purchase price is less than three times as much. The two turbines have the same installation cost, and the operating and maintenance cost of the larger turbine is less than twice as large. Adding the various costs, the larger turbine, with four times the generating capacity, has less than twice the cost. As a result, the average cost per kilowatt-hour is only $0.032 for the large turbine, compared to $0.065 for the smallerturbine.