What is the primary benefit of economies of scale?

The primary benefit of economies of scale is the ability to lower production costs. As a company increases its production volume, it can spread fixed costs, such as administration, leasing, and factory maintenance, over a larger number of units. This leads to a reduction in the cost per unit of production. Furthermore, larger production runs often allow businesses to negotiate better terms with suppliers, purchase raw materials in bulk at discounted rates, and utilize more efficient production techniques and technologies.

This concept is crucial in competitive markets, as businesses that manage to lower their costs can potentially offer lower prices to consumers, which can help capture a larger market share. It ultimately contributes to greater profitability and sustainability for the company. Other options do not directly relate to the primary benefit of economies of scale; for instance, increasing tariffs pertains to trade policy, enhancing international trade involves broader market interactions, and improving possession utility relates to consumer satisfaction rather than production efficiency.