Economies of scale ... - OECD Glossary of Statistical Terms
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Economies of scale refers to the phenomenon where the average costs per unit of output decrease with the increase in the scale or magnitude ... ECONOMIESOFSCALE Glossary Home About Contact Us Downloadable Version Advanced Filter Web Service OECDStatistics Definition: Economiesofscalereferstothephenomenonwheretheaveragecostsperunitofoutputdecreasewiththeincreaseinthescaleormagnitudeoftheoutputbeingproducedbyafirm.Similarly,theoppositephenomenon,diseconomiesofscale,occurswhentheaverageunitcostsofproductionincreasebeyondacertainlevelofoutput.Atthepointwheretheaveragecostsareataminimum,theminimumefficientscale(MES)ofoutputofafirmorplantisreached.Adistinctionisoftenmadebetweendifferenttypesofeconomiesofscalesuchas:-Productspecificeconomiesofscale;and-Plantspecificeconomiesofscale. Context: Themaximumefficientscaleofoutputisreachedatthepointjustbeforediseconomiessetin,thatisunitcostsofproductionstarttoincrease.Betweentherangeofminimumandmaximumefficientscaleofoutput,theremayalsoexistconstantreturnstoscalewheretheaverageunitcostsofproductionremainunchangedasoutputincreases.Theminimumandmaximumscalesofoutput,inrelationtothetotaldemandormarketsizehaveanimportantbearingonthenumberandsizedistributionoffirmsinanindustryandonconcentration. Source Publication: GlossaryofIndustrialOrganisationEconomicsandCompetitionLaw,compiledbyR.S.KhemaniandD.M.Shapiro,commissionedbytheDirectorateforFinancial,FiscalandEnterpriseAffairs,OECD,1993. Cross References: Plantspecificeconomiesofscale Productspecificeconomiesofscale Hyperlink: http://www.oecd.org/dataoecd/8/61/2376087.pdf Statistical Theme:Financialstatistics Created onThursday,January3,2002 Last updatedonTuesday,March4,2003
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