Final answer:
A company might establish a concentrated production configuration to take advantage of economies of scale, to utilize production technology that offers the lowest total cost, and to optimize the production scale for cost-efficiency.
Step-by-step explanation:
Three factors that would lead a company to establish a concentrated production configuration include:
- Economies of scale: As the quantity of output goes up, the cost per unit goes down. This is advantageous for larger factories, which can produce at lower average costs compared to smaller factories.
- Lower total cost with production technology: If a particular production technology offers the lowest total cost, it can be compelling for a company to focus its production using that technology, which often involves automation and fewer labor costs.
- Optimization of production scale: After choosing the least costly production technology, focusing on a concentrated production approach allows a firm to produce the optimal quantity of output and leverage economies of scale.