Economies of Scale

Economies of scale are the cost advantages that a business can exploit by expanding their scale of production. It mean that as firms increase in size, they can become more efficient. Economies of Scale are most important because, of the inverse relationship between the quantity produced and per-unit fixed costs; i.e. the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are spread out over a larger number of goods. It often have limits, such as passing the optimum design point where costs per additional unit begin to increase.