... to a situation where the cost of producing a good or service decreases as the volume of production increases. The converse situation in which the cost of producing a good or service increases as the volume of production increases is known as diseconomies of scale. Economies of scale tend to occur in industries with high capital costs in which those costs can be distributed across a large number of units of production. In such industries, marginal cost is usually low when compared with their high capital costs. As we can notice that in some industries, plentiful participants are often more efficient than just a few (e.g. many consumer goods such as garment and apparel) while in other industries, the market simply becomes inefficient with many players (e.g. utility such as gas, electricity). The exploitation of economies of scale helps us explain these phenomenon and answer questions such as why companies grow ...

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