Answer to Question #195207 in Macroeconomics for Geel Mdluli

Question

Describe the term Economies Of Size

Answer 1

Economies of size is a concept that means that the average cost per unit of production decreases as the size of production increases. Economies of size often result from spreading a firm's fixed costs over a large number of units of production. Since fixed costs are constant, increasing the number of units produced decreases the fixed cost per unit and subsequently, the total cost per unit also declines.