Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, where the cost per unit of output decreases as production increases. This means that as a company grows and produces more goods, it can often do so more efficiently, spreading fixed costs over a larger number of units and reducing the per-unit cost. These advantages can arise from various factors including bulk purchasing, managerial specialization, technological efficiencies, financial benefits, and marketing leverage. There are two main types of economies of scale: internal economies of scale, which originate within a company due to operational efficiencies or managerial decisions, and external economies of scale, which occur due to industry-wide improvements such as better infrastructure or skilled labor pools. Achieving economies of scale often helps companies gain competitive advantages by lowering costs, increasing production, and potentially dominating markets. However, if a company grows too large, it may face diseconomies of scale, where costs per unit rise again due to inefficiencies. In essence, economies of scale represent a fundamental economic principle explaining why larger production volumes typically lead to lower average costs, aiding businesses in becoming more competitive and profitable.