an average cost of production of only $10 per toaster oven. Although plant V can produce 200 units of output, it

still has the same unit cost as Plant L.

In this example, a small or medium plant, like S or M, will not be able to compete in the market with a large or a

very large plant like L or V, because the firm that operates L or V will be able to produce and sell its output at a

lower price. In this example, economies of scale operate up to point L, but beyond point L to V, the additional

scale of production does not continue to reduce average costs of production.

FIGURE 19.5 Economies of Scale Production Plant S, has an average cost of production of $30 per toaster oven.

Production plant M has an average cost of production of $20 per toaster oven. Production plant L has an average

cost of production of only $10 per toaster oven. Production plant V still has an average cost of production of $10 per
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