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MENTAL MODEL · M4651

Economies of Scale

Economies of Scale
BusinessHigh supportMicroeconomics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

The phenomenon where the average cost per unit of product decreases as the scale of production expands. This is usually due to fixed costs being spread over more products, or efficiency improvements brought about by specialization and division of labor.

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The logic of enterprise growth. Economies of scale explain why large enterprises often have cost advantages, and are also an important driving force for industrial concentration and market structure formation. However, it should be noted that economies of scale have limits, and excessive expansion may lead to diseconomies of scale.

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Economies of scale: As output increases, average cost decreases, due to the spreading of fixed costs and specialization and division of labor.

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Economies_of_scaleZH · Explicit
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