Economies of Scale – The Economics Classroom

Economies of Scale

“The benefits of being big.” As a firm increases its output in the long run, it adds more factories, acquires more capital and land and labor and sees its average total costs decrease as it grows. This arises due to factors such as increase efficiency, bulk-ordering, reduced shipping costs, increased bargaining power with resource suppliers and labor unions, more favorable interest rates from lenders, etc…

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