What are the charateristics of economics of scale
Economics
ScanSolve AI Answer
Answer
Economics of scale are characteristics that lead to a decrease in the average cost per unit of output as the scale of production increases.
- Lower Average Costs: As production volume rises, fixed costs (like factory rent) are spread over more units, reducing the cost per unit.
- Increased Specialization: Larger operations can afford specialized labor and machinery, leading to greater efficiency.
- Bargaining Power: Larger firms can negotiate better prices for raw materials due to bulk purchasing.
- Technological Advantages: Larger companies can invest in more advanced and efficient technology.
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