Economies of Scale and Scope


Economy of scale is a concept that arises in the context of the production of a good or service, and other similar activities undertaken by organisations. This concept will provide an understanding of economies of scale, and some other concepts related to the production process.

Technique Overview

Economies of Scale and Scope Definition

Economies of scale refers to the phenomenon where the average costs per unit of output decrease with the increase in the scale or magnitude of the output being produced by a firm. Economies of scope exist when it is cheaper to produce two products together (joint production) than to produce them separately (OECD, 2008).

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Business Evidence

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Business Application

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Further Reading

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Economies of Scale and Scope References (4 of up to 20) *

  • Ang, J.S. and Lin, L.W. (2001) A Fundamental Approach to Estimating Economies of Scale and Scope of Financial Products: The Case of Mutual Funds. Review of Quantitative Finance and Accounting, Vol. 16(3), pp. 205-21.
  • Barnes, D. (2008) Operations Management: An International Perspective. Thomson, London.
  • Bitros, G.C. (2005) Scale, Scope and Entrepreneurship. In Y. Cassis and I. Pepelasis-Minoglou (Eds.), Entrepreneurship in Theory and History. Palgrave, London.
  • Cummins, J.D. and Xie, X.-Y. (2008) Mergers and Acquisitions in the US Property-liability Insurance Industry: Productivity and Efficiency Effects. Journal of Banking and Finance, Vol. 32(1), pp. 30-55.

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