If there are increasing returns to scale, then it makes sense to consolidate operations into one production facility

Question

Quizplus · Accepted Answer

If there are increasing returns to scale, it means that producing more results in lower average costs. Consolidating operations into a single facility can take advantage of this, resulting in even lower average costs. If production above domestic demand can be exported, this can be a valuable opportunity to increase revenue from the lower costs. However, if the consolidation does not create an absolute advantage over other trading partners or if the government does not subsidize production, it may not be worth consolidating. Additionally, it is important to consider the potential loss of comparative advantage gains between production facilities, but this may be outweighed by the benefits of lower costs if there are increasing returns to scale.

If There Are Increasing Returns to Scale, Then It Makes