The Supply Room, a mail-order school supply store, grew rapidly. As a result of achieving a much larger size, the Supply Room is able to realize (1) volume discounts when buying from its suppliers, and (2) lower transportation costs by shipping in bulk. The best explanation of this is that the Supply Room seems to be experiencing

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The Supply Room's ability to benefit from volume discounts and lower transportation costs as it grows indicates increasing returns to scale, meaning that as the company grows, its output per unit of input increases.

The Supply Room, a Mail-Order School Supply Store, Grew Rapidly