Final answer:
A firm has economies of scale when its cost of sales (COGS) is low.
Step-by-step explanation:
The firm's cost of sales (COGS) can be low when it can purchase its inputs at a lower cost than competitors and/or run its production process more efficiently. This is generally the case when a firm has economies of scale.
When a firm experiences economies of scale, the cost per unit of output decreases as the quantity of output increases. This means that a larger factory can produce at a lower average cost than a smaller factory. Warehouse stores like Costco or Walmart are examples of businesses that benefit from economies of scale.
In summary, when a firm has economies of scale, it can purchase inputs at a lower cost and operate its production process more efficiently, resulting in a lower cost of sales.