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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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