Definition of «economy of scale»

The term "economy of scale" refers to the cost advantages that businesses can achieve when they increase their level of production. As a company produces more goods or services, the fixed costs can be spread out over a greater number of products, resulting in lower per-unit costs and ultimately higher profitability. In other words, as a firm grows and expands its operations, it is able to take advantage of efficiencies that allow them to produce their goods at a lower cost than smaller competitors. This concept is often used to explain why larger companies can sometimes offer products or services at lower prices than smaller firms.

Sentences with «economy of scale»

In other words, it allows companies to take advantage of economies of scale in clean up investments and pass them along to others that might not qualify on their own. (sciencenews.org)
Additionally, larger REITs benefit from economies of scale as corporate expenses can be spread over a larger asset base. (nreionline.com)
Typically, a geothermal project can not produce electricity economically at a scale less than 5 MW and there is a very large economy of scale for projects above 30 MW in size. (altarockenergy.com)
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