Economies of scale refer to the cost advantages that a company can achieve by producing and selling goods or services in large quantities. As the volume of production increases, the average cost per unit decreases, allowing the company to lower prices and increase profits. This is due to the spreading of fixed costs, such as production equipment and overhead expenses, over a larger number of units. Economies of scale can also result from increased efficiency and specialization in production processes. In short, economies of scale allow companies to produce more for less, giving them a competitive edge in the market.