Companies can obtain cost efficiencies with an increasing quantity of output.
This occurs when an increase in output lowers the long run cost per piece. For
instance, overhead costs per unit will drop when more units are produced, making
the per unit price less expensive.
Companies will be able to obtain economies of scale until the company realizes
diseconomies of scale, where the cost per unit will increase with more units
produced. This might occur when new capacity is required that will not be fully