Which economic concept refers to the cost advantage due to increased production?

The correct answer, economies of scale, refers to the phenomenon where the average cost of producing each unit of a good decreases as the volume of production increases. This cost advantage occurs because fixed costs, such as equipment and facilities, are spread over a larger number of goods produced. Additionally, bulk purchasing of materials and more efficient utilization of labor contribute to lower per-unit costs.

As a business increases its production, it can benefit from operational efficiencies and improved techniques that further reduce variable costs per unit. This concept is crucial for companies aiming to improve their profitability as they expand their output. Recognizing economies of scale can help businesses make informed decisions about production levels and pricing strategies to remain competitive.

Market saturation refers to a situation where the supply of a product exceeds its demand, which does not relate directly to cost advantages of production. Marginal utility is a concept in economics that describes the additional satisfaction gained from consuming one more unit of a good or service. Supply chain management focuses on the flow of goods and services from suppliers to consumers, which while it can impact efficiencies and costs, does not specifically describe the advantage gained through increased production volume like economies of scale does.