What are 'Economies of Scale'?

Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure.

Sharper Insight. Smarter Investing. Manage Preferences TERM OF THE DAY Economies of Scale Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power hand tools at a lower unit price, and a larger medical system will reduce cost per medical procedure. Breaking it Down: Economies of scale give rise to lower per-unit costs for several reasons. First, specialization of labor and more integrated technology boost... Read More Related to "Economies of Scale" What are some examples of economies of scale? Take a look at different examples of economies of scale, including how marginal costs can be reduced through external and internal factors. Read More What's the Difference Between Economy of Scope and Economy of Scale? Learn about economy of scope and economy of scale, the difference between the two economic concepts and how they offer cost advantages to companies. Read More How do economies of scale work with globalization? Discover how globalization can lead to unprecedented economies of scale for firms across the world, leading to higher global efficiency and productivity. Read More Related Definitions Marginal Cost Of Production Marginal cost of production is the change in total cost that comes from making or producing one additional item. Read More Operational Efficiency Operational efficiency is primarily a metric that measures the efficiency of profit earned as a function of operational costs. Read More Fixed Cost A cost that does not change with an increase or decrease in the amount of goods or services produced. Read More Applied Cost A term used in cost accounting to denote the cost assigned to something, which may be different from the actual cost. Read More You are currently subscribed as: mondemand.forex@blogger.com Unsubscribe  |  Manage Subscriptions Investopedia, LLC, A Division of IAC. 114 West 41st St, floor 8, New York NY 10036 Copyright © 2018, Investopedia, LLC. All Rights Reserved Follow Us: