Economy of scale

Economies of scale characterizes a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit. Economies of scale can be enjoyed by any size firm expanding its scale of operation. The common ones are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output in media markets). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right.
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In economics, returns to scale and economies of scale are related terms that describe what happens as the scale of production increases. They are different terms and are not to be used interchangeably.
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Noun
1. the saving in cost of production that is due to mass production
(hypernym) economy, saving

A lower cost per unit produced, achieved through large-scale production. The lower cost can result from better tools of production, greater discounts on purchased supplies, production of by-products, and/or equipment or labor used at production levels closer to capacity. A large cattle feeding operation may be able to benefit from economies such as lower unit feed costs, increased mechanization, and lower unit veterinary costs .