Economies of scale are cost advantages reaped by companies when production becomes efficient.
 | | Term of the Day | Words to Know | | |  | | Economies of Scale | Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods. Costs can be both fixed and variable.
The size of the business generally matters when it comes to economies of scale. The larger the business, the more the cost savings.
Economies of scale can be both internal and external. Internal economies of scale are based on management decisions, while external ones have to do with outside factors. | | Read More » | | Related to "Economies of Scale" | | | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Cost of Capital | | Cost of capital is the required return a company needs in order to make a capital budgeting project, such as building a new factory, worthwhile. | | Read More » | | | Overhead | | Overhead refers to the ongoing business expenses not directly attributed to creating a product or service. | | Read More » | | | Economies of Scope | | Economies of scope are economic factors that make it cheaper to manufacture a variety of products together instead of on their own. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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