7.12 : 規模の経済

Economies of scale occur in the long run when a firm's output increases, causing a proportionately lower rise in cost. For example, a firm may produce double the output by spending 1.6 times the cost. This reduces the average total cost, as seen in the downward slope of the average total cost curve.

Various factors could reduce costs.

For example, a car manufacturer could automate the assembly line with minimal human intervention, thereby reducing costs.

An ability to negotiate prices with suppliers for bulk procurement of materials can contribute to cost reduction.

The firm can enter into long-term contracts with suppliers. The suppliers get guaranteed business. In return, the suppliers might offer materials at reduced prices, thereby reducing costs.

Additionally, over time, the firm can anticipate production levels with greater accuracy. This prevents overstocking inventory, resulting in cost reduction.

Moreover, as the firm proves its reliability and profitability in the long run, it may improve its credit rating. A higher credit rating can lead to lower interest rates, contributing to cost reduction.