Answer on Other Management Question for emily
unit of output generally decreasing with increasing scale as fixed costs are
spread out over more units of output.
Often operational efficiency is also greater with increasing scale, leading to
lower variable cost as well.
Economies of scale apply to a variety of organizational and business situations
and at various levels, such as a business or manufacturing unit, plant or an
entire enterprise. For example, a large manufacturing facility would be
expected to have a lower cost per unit of output than a smaller facility, all
other factors being equal, while a company with many facilities should have a
cost advantage over a competitor with fewer.
So, if he company is planning to expand its production department, it
might be ruining low on cost in next few months according to economies of scale.
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