Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods. Costs can be both fixed and variable. Economies of scale can be both internal and external. Internal economies of scale are based on management decisio... more

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Alyssa Miller
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403 students helped

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7 months ago

Think I ought to clarify the previous answer since it's not quite revision-perfect. Economies of scale refers to a decreasing average cost for an increase in quantity. This occurs when marginal cost, the change in cost for any additional unit produced, is below average cost.

Super important concept in firm theory :) Explains why big companies like tech giants Facebook and Google are so successful... more

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Aloysius Lip
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7 months ago


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