Economies of Scale 

In its expansion plan, a firm wants to acquire more shares on the market for its specific product being traded by it.  If there is sufficient demand of its product, firm plans increase in production of the product. For this purpose, firm invests capital and labour.  Before going to increase in production, firm analyse the cost required to increase production. If firm founds that, rational cost of production is more than the rational production, then it drops expansion plan.  For example, if firm founds that, while doubling the production, its expenses are more than double then surely firm does not go ahead with expansion plan.  Numerically, if production of 100 soap bar costs to a firm to Rs. 4500/- with profit of Rs. 50/- and production of 200 soap bars costs it to Rs. 9100/- then surely firm does not increase its production. In increased production, the cost incurred is equal to the double of previous input costs and profit earned. Under increased production, firm has zero profit. The expansion of firm's production is based on Long Run Average Cost (LRAC). It is said that a firm is in economies of scale if LRAC decreases as the firm's output increases. The firms LRAC is negatively sloped in the presence of scale economies. A firm is in economic of scale if it achieves double production within the less than doubling of costs.