Economies of scale drive industry structure from "summary" of The Economic Naturalist by Robert H. Frank
One of the key factors that shape the structure of industries is the concept of economies of scale. This concept refers to the cost advantages that a firm can achieve by increasing its level of output. As a firm produces more units of a good or service, it is able to spread its fixed costs over a larger number of units, leading to a reduction in average costs. This reduction in average costs allows the firm to lower its prices, which can give it a competitive advantage in the market. Economies of scale can drive industry structure in a number of ways. For example, industries that have high fixed costs relative to variable...
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