What term describes the increase in production efficiency as the quantity of goods produced increases?

• A. Learning Curve
• B. Economies of Scale
• C. Diseconomies of Scale
• D. Specialization

Answer: (B)

Economies of scale describe the decrease in average cost per unit as output expands. When a firm produces more, fixed costs like plant and equipment are spread over more units, and bulk purchasing and more efficient production processes can lower input costs, making production more efficient as quantity rises. This is why producing larger quantities often yields lower per‑unit costs. The learning curve focuses on gains from workers becoming more proficient with experience, which reduces time per unit as cumulative production grows, but it’s about human efficiency rather than overall scale. Diseconomies of scale would reverse the effect, raising average costs if the firm becomes too large and coordination suffers. Specialization helps drive efficiency by dividing tasks, and it can contribute to economies of scale, but the phenomenon described by the question is the broader cost advantage that comes with producing more.