Definition
- Economies of scale
- Economies of scale describe the situation where, as a firm's quantity of output goes up, its cost per unit goes down.
- Not to be confused with: Diseconomies of scale
- Diseconomies of scale describe the situation where, as the level of output and the scale rise, average costs rise as well.
Test yourself
What is the difference between economies of scale and diseconomies of scale?
Both describe what happens to cost per unit as a firm grows: economies mean it falls, diseconomies mean it rises.
Learn it properly: the module
Also in: How a monopoly forms, Why countries trade