What is a significant benefit of economies of scale?

The significant benefit of economies of scale lies in the ability to lower per-unit costs as production output increases. As a company expands its operations and produces more goods, it can spread the fixed costs over a larger number of units. This leads to reduced average costs for each unit produced since the setup, administrative expenses, and other fixed costs remain constant regardless of the number of units manufactured.

When a firm achieves economies of scale, it can also negotiate better prices for raw materials due to bulk purchasing and may benefit from more efficient production processes. These advantages allow the company to either maximize profits by retaining the cost savings or pass those savings on to consumers in the form of lower prices, which can enhance competitiveness in the market.

The other options do not highlight the core advantage of economies of scale. Increased marketing budgets and higher production costs do not necessarily correlate with the essential benefit of reducing costs per unit as volume increases. Similarly, having fewer product options available may be a byproduct of focusing on efficient production but does not directly relate to the fundamental advantages associated with economies of scale.