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When more units of a good or service can be produced on a larger scale, yet with (on average) fewer input costs, economies of scale are said to be achieved. Alternatively, this means that as a company grows and production units increase, a company will have a better chance to decrease its costs.

The thing that would happen to a firm with limited economies of scale is:

  • Increased profit

Economies of scale has to do with those cost advantages which a company experiences when their production becomes efficient and cost is saved.

As a result of this, when a firm uses limited economies of scale, then the would likely be an increase in profit as production becomes better, reducing overhead cost.

There are different types of economies of scale which include:

  • Internal economies of scale
  • External economies of scale
  • Purchasing, etc

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