When a firm produces a large quantity of a product, the cost of producing each individual unit usually goes down. This is known as:

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Economies of scale refer to the cost advantages that a firm experiences due to producing a larger quantity of a product. As the production quantity increases, the average cost of producing each unit decreases. This is because the fixed costs associated with the production process are spread over a larger number of units, resulting in lower per-unit costs.

When a Firm Produces a Large Quantity of a Product