What is typically an effect of operating at a larger scale?

Operating at a larger scale typically results in decreased average costs, a phenomenon commonly referred to as economies of scale. As a business increases its production levels, it is able to spread fixed costs, such as administration, rent, and salaries, over a greater number of units. This leads to a reduction in the average cost per unit produced.

In addition, larger-scale operations often allow companies to negotiate better rates with suppliers, purchase raw materials in bulk, and utilize more efficient production techniques. All these factors contribute to lower average costs, making it possible for businesses to increase their competitiveness by lowering prices or improving profit margins.

The other choices do not align with the typical effects of scaling operations. Increased variable costs is more likely to occur due to higher resource consumption and operational inefficiencies at smaller scales. Higher unit prices would generally arise from decreased production efficiency and not from scaling effectively. Similarly, reduced operational capacity contradicts the benefits of scaling, as larger operations typically enhance production capacity rather than diminish it.