|Overview: Economies Of Scale|
The tendency for costs to drop as you produce more of a product or service.
Scaling is often a strategy to build a cost advantage over competitors.
What are Economies Of Scale?
John Spacey, updated on April 03, 2018
Economies of scale is a product or service that drops in cost as you produce more. This is often due to the dilution of fixed costs such as property, plant and equipment. In many industries, large firms have a cost advantage over small firms due to economies of scale. At the level of an individual company, economies of scale may hit a limit when your existing equipment reaches full capacity. In other cases, firms are able to continue to scale until they produce as much as the market can absorb at a given price level.
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