Which concept describes cost advantages achieved by producing more units?

• A. Economies of Scale
• B. Minimum Efficient Scale
• C. Flexible Manufacturing
• D. Mass Customization

Answer: (A)

When you increase how much you produce, the average cost per unit often falls. That happens because fixed costs stay the same regardless of output, so spreading those costs over more units lowers the cost per unit. You can also gain efficiencies from buying inputs in bulk, using machinery more intensively, and gaining experience that makes production faster and smoother. This combination of spreading fixed costs and gaining operational efficiencies is what economists call economies of scale.

The other ideas describe different things. The minimum efficient scale is the smallest level of output where costs are minimized overall, not the ongoing savings that come from producing more. Flexible manufacturing refers to a system’s ability to switch between products without losing efficiency, not the cost advantage from higher volume. Mass customization is about producing customized products at scale, which is more about customization capabilities than pure cost per unit savings with higher output.