Why does an industry with many small firms have low capital costs
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That's because the cost per unit depends on how much the company produces. Larger companies are able to produce more by spreading the cost of production over a larger amount of goods. ... There are several reasons why economies of scale give rise to lower per-unit costs.
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A business's size is related to whether it can achieve an economy of scale—larger companies will have more cost savings and higher production levels. Economies of scale can be both internal and external. Internal economies are caused by factors within a single company while external factors affect the entire industry.
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