Economy of Scale

Posted on February 20, 2011 by Thomas DeGrace

Economy of Scale referred also as economies scale is the reduction of cost due to increased output.

Understand How Economy of Scale Works

When a company does an acquisition or merger, you often hear them refer to economics of scale as one of the primary reasons for the acquisition.  As a company grows larger with fewer competitors, they often get better pricing on services and materials due to their large size.  Marketing dollars can also be reduced as a % spent on goods/services sold.

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