94.5k views
3 votes
Explain the concept of economic scale

User Algeroth
by
7.1k points

1 Answer

3 votes

Answer:

See below

Step-by-step explanation:

Economies of scale refer to the cost advantages a business will enjoy due to producing in large quantities. There exists an indirect relationship between the per-unit cost of an item and the quantities produced. A larger volume of production will have a lower per-unit cost of the output.

The fixed cost part is one factor why a business experiences economies of scale. In production, fixed costs remain constant throughout the financial period. A large output means that the fixed costs will be spread over many units resulting in a lower fixed cost element in every item. A low volume output implies that the fixed costs will be divided by a few items resulting in a high fixed cost element per unit. Large-scale production leads to lower per-unit costs, which is referred to as economies of scale.

User A J Qarshi
by
7.5k points