Bethany works for a company that makes sports socks. Unlike many smaller companies, Bethany’s company ships out such large quantities of sports socks that their unit cost is less than half of the competition. What does this company benefit from?

Economies of scale

Explanation:

Economies of Scale is the cost advantage a firm enjoys when they increase their level of output.The increase in quantity of out leads to a decrease in cost of production that is, there is an inverse relationship between quantity of output and cost of production.

Economies of scale can be incorporated by a firm at any stage of their production process.

Types of Economies of Scale

1. Internal Economies of Scale:

This is a type of economies of scale where FIRMS have an advantage of producing more at a low cost.

2. External Economies of Scale:These refers to economies of scale enjoyed by an INDUSTRY or a particular SECTOR of the economy by producing more commodity at a low cost.

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