increasing returns

Increasing returns occur when producing more of a good or service lowers the average cost per unit, making it more efficient as scale grows. This often happens due to factors like specialized equipment, better expertise, or network effects that become more valuable with increased size. For example, a larger company can spread fixed costs over more products or benefit from word-of-mouth, leading to faster growth and lower costs per unit compared to smaller competitors. Essentially, the larger and more established an operation becomes, the more efficient and cost-effective it is, fostering further growth and competitive advantage.