The law of economies of scale suggests that unit costs continue to fall indefinitely as output volume increases.

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The law of economies of scale suggests that unit costs initially decrease as output volume increases, but eventually reach a minimum point before increasing again. This is because as production increases, fixed costs can be spread out over more units, leading to lower unit costs. However, there are also limitations to this, such as the availability of raw materials, labor, and equipment, which can cause inefficiencies or bottlenecks that increase costs. Additionally, as output volume continues to increase, there may be diminishing returns or diseconomies of scale, where further increases in production can actually lead to higher unit costs due to factors such as increased complexity, difficulty in coordination, or decreased flexibility.

The Law of Economies of Scale Suggests That Unit Costs