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Economies of Scale

 
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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 utilized. 
 
 
 
 
Date Created: 2011-02-05
Posted by: Admin
 
 
Economies of Scale
 

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Online MBA, Online MBA Courses, Economies of Scale, scale factors, diseconomies of scale

 






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