Increasing returns to scale.
Economies of scale refer to instances where the average unit cost falls as output increases. A particular point on the curve is where it starts flattening out – called Minimum Efficient Technical Scale (METS). The slope of the curve and the position of METS volume relative to total industry production give insight into the nature of competition in the particular industry. Reference: Modern Competitive Analysis, Sharon M. Oster, New York (1990).
Reductions in the cost of producing a product as the scale of output increases.
A decline in cost with accumulated sales or production. In advertising, economies of scale often occur in media purchases as the relative costs of advertising time and/or space may decline as the size of the media budget increases. [Go to source
Economies of scale occur when larger firms are able to lower their unit costs. This may happen for a variety of reasons. A larger firm may be able to buy in bulk, it may be able to organise production more efficiently, it may be able to raise capital cheaper and more efficiently. All of these represent economies of scale.
The decrease in the marginal cost of production as the size of a company's operations increases.
the cost advantages associated with large company output. p. 82
reductions in unit costs arising from large-scale production.
is based upon the theory that the more you produce of a good, the less that it costs for each additional unit, i.e., efficiency. Specifically, it is the reduction of the costs of production of goods due to increasing the size of the producing entity and the share of the total market for the good/product.
Reducing the cost of a particular element of education (such as course material), by increasing the number produced, or by reducing the number of institutions through mergers. Relies on the marginal costs being low in relation to the fixed costs.
Attempts to reduce costs by increasing the number of items produced and sold or reducing the number of competing institutions.
The extra cost savings that occur when higher volume production allows unit costs to be reduced.
Advantages realized when combining of loads or services results in decreased average long-run costs.
the principle that describes lower average costs resulting from “mass” production of a product; as the quantity produced increases, the cost of each unit decreases. Principle can be applied to non-production situations, e.g., marketing economies that result when the cost of advertising is spread across a high level of sales that occur from the advertising. A reason why market share is said to drive profitability.
when increased output lowers a product's average cost.
Savings achieved in the cost of production by larger enterprises because the cost of initial investment can be defrayed across a greater number of producing units.
are present when a doubling of all inputs results in output more than doubling. The effective tax rate is the taxpayer's tax bill divided by her or his total income. In efficiency wage models the productivity of labor depends on the real wage workers are paid. In such models, the real wage is set to maximize the efficiency units of labor per dollar of expenditure, not to clear the labor market.
A condition in which, when a firm increases its plant size and labor employed by the same percentage, its output increases by a larger percentage and its average total cost decreases. (p. 277)
Technological conditions under which the long-run average cost of producing a good or service decreases as output increases.
The decreases in combined operating expenses and/or increases in combined revenues which result following the merging of two or more business operations. See Synergy See Post-acquisition net economic value-added (or benefits) See Strategic advantage
the larger the organization, the lower the cost per unit to reach the marketplace; at a certain size, diseconomies of scale can set in
Production exhibits economies of scale if average (per unit) costs fall as output increases, and diseconomies of scale if average cost increases as output increases. Scale economies can occur at the level of individual plants or farms, in which case they generally reflect elements of the production process within a plant or farm. Scale economies at the level of a firm may also reflect elements of marketing and distribution costs. Scale economies and diseconomies are sometimes further distinguished as technological, reflecting changes in input use as output expands, or pecuniary, reflecting changes in prices paid for inputs as output expands.
Increased efficiency of operations and the multiple use of resources lowers average variable costs and, in consequence, average total costs.
refers to a graph that features at the right bottom of FundScope's Mutual fund Summary Reports. It shows the trend of each fund's MER compared to asset size. If MER decreases as a result of asset growth, unitholders are considered to have benefited from economies of scale. On the other hand, a stable or higher MER means that the fund company has reaped the full benefit of economies of scale and has not shared any of this benefit with investors. Efficiency: is measured in terms of risk-adjusted returns (RAR). If two funds have a similar risk level, the fund that produces the higher return is more efficient, because it makes better use of the assumed risk.
The decline in cost per unit as additional units are produced.
a situation in which an increase in the scale at which a business operates will lead to a reduction in unit costs.
Reductions in the unit cost of a service resulting from increased efficiency associated with larger operations.
Achieving lower average cost per unit through a larger scale of production. This is achieved by spreading fixed cost over a greater amount of production.
A decrease in the marginal cost of production due to the increased size or scale of a company's operations.
There are both internal and external economies of scale. Internal economies of scale refer to reducing average production costs within a firm. This occurs when overall production increases while certain fixed costs (rent, machinery) remain constant. The ability of large firms to utilize machinery and other technology that require a large initial investment (outside the reach of smaller firms) yet increase cost efficiency in the long term is a common source or economies of scale. External economies of scale exist outside of the firm and are the result of location. A firm may be located near a large market which makes mass production profitable, offers more efficient and comprehensive distribution and transport systems, or is near to a specialized workforce.
Economies of scale refers to the synergies that arise when large quantities of a product are traded. These advantages are usually price-related.
The benefit that larger production volumes allow fixed costs to be spread over more units lowering the average unit costs and offering a competitive price and margin advantage.
These are present where the unit cost falls as the level of output rises.
Efficiencies associated with larger-scale operations. For example, it might cost a manufacturer $100 to manufacture one unit, $180 for two units, $240 for three units, and so on, such that the average cost per unit decreases as production volume increases.
savings made as a result of large-scale production, through buying in bulk, division of labour etc.
Those economies or savings that may be made through large scale operations.
Source: DSMC Reductions in unit cost of output resulting from the production of additional units stem from increased specialization of labor as volume of output increases; decreased unit costs of materials; better utilization of management; acquisition of more efficient equipment; and greater use of by-products.
increasing production of one kind of output creating a reduction in the cost per unit.
Cost advantages derived from modern world-scale plants.
Factors that cause lower costs when buying in bulk.
Unit cost reductions which result from increasing total output.
These result in the company benefiting from a reduction in the average cost per unit.
The ability of larger companies to produce things more cheaply per unit because they produce so many.
Economies of scale is an economic term that means that a company may produce goods or services at a cheaper cost per unit when these goods or services are produced in large quantities. In such a case, a company would want to maximize production so as to minimize cost.
Economies of Scale is per unit cost savings that increase as the number of items produced increases. As the number of units produced increases, Fixed Costs remain the same; therefore, the currency amount added to each unit to recover Fixed Costs is reduce
Economies of scale exist where the industry exhibits decreasing average long-run costs with size.
The decrease in average production costs accompanying an increase in capital employment.
A decrease in cost as supply increases.
The decrease in the marginal cost of production as a plant's scale of operations increases.
as a firm increases output the cost per unit declines
Economic principle that as the volume of production increases, the cost of producing each unit decreases.
Economies based on the principle that the more you produce of any item, the less cost of each item. This principle is apparent especially in mechanized and automated-production processes. Unit costs usually decrease when volumes increase for many reasons, ranging from enhanced worker skill to price savings in the purchase of raw materials.
This is the situation whereby larger firms are able to lower their unit costs below the level of smaller firms in the same industry.
Situation by which the average per square foot cost of construction declines as building size and volume expands.
Features of a firm's technology that lead to falling long-run average cost as output increases.
increasing output to lower costs. Page 72
The reduction in long run average cost as the size (scale) of the company increases.
Reductions in the average unit costs as an organisation increases in size or increases the scale of production to benefit from cost savings as it increases to optimal capacity. See also Diseconomies of Scale.
The tendency for certain classes of costs to decrease as a institution's size or volume of business increases.
Economies of scale characterizes a production process in which an increase in the number of units produced causes a decrease in the average cost of each unit.