: The characteristics of a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit
Average costs decrease with increased size and distribution of product "Economies that arise from increasing the size of an operation; in the case of distance education, economies that arise from increasing the number of students " (See Inglis, Ling, & Joosten (1999) pp 44, 198 and Moore & Kearsley (1996) pp 73-74)
Efficiencies associated with larger-scale operations For example, it might cost a manufacturer $100 to manufacture one unit, $180 for two units, $240 for three units, and so on, such that the average cost per unit decreases as production volume increases
Cost reductions or productivity efficiencies achieved through size-optimization in relation to operational circumstances For example, commodity freight rates usually decline as the volume of cargo tonnage shipped increases
refers to a graph that features at the right bottom of FundScope's Mutual fund Summary Reports It shows the trend of each fund's MER compared to asset size If MER decreases as a result of asset growth, unitholders are considered to have benefited from economies of scale On the other hand, a stable or higher MER means that the fund company has reaped the full benefit of economies of scale and has not shared any of this benefit with investors
Effect on unit cost of producing large quantities In distance education the larger the number of users of a course or the larger the number of users of the system, the lower the cost for each person
Savings achieved in the cost of production by larger enterprises because the cost of initial investment can be defrayed across a greater number of producing units
a situation in which long-run average total cost declines as the output of a firm increases (also called increasing returns to scale) (chapters 8 and 12)
Economies of scale occur when larger firms are able to lower their unit costs This may happen for a variety of reasons A larger firm may be able to buy in bulk, it may be able to organise production more efficiently, it may be able to raise capital cheaper and more efficiently All of these represent economies of scale
Economies of scale are the financial advantages that a company gains when it produces large quantities of products. Car firms are desperate to achieve economies of scale
If all the inputs in a production process are increased and the output increases by proportionately more than the inputs were increased, economies of scale are being realized There may also be diseconomies of scale which occur when an increase in all inputs brings about a less than proportionate increase in output
The benefit that larger production volumes allow fixed costs to be spread over more units lowering the average unit costs and offering a competitive price and margin advantage Producing in large volume often generates economies of scale The per-unit cost of something goes down with volume because vendors charge less per unit for larger orders, and often production techniques and facilities cost less per unit as volume increases Fixed costs are spread over larger volume