What is a technical economy of scale?

A technical economy of scale refers to the cost advantages that larger firms can achieve by investing in advanced and often expensive machinery or equipment that increases production efficiency. When a firm scales up its operations, it may have the financial capacity to purchase more sophisticated technology that smaller firms might not afford, allowing it to produce goods at a lower cost per unit. This is often due to factors such as improved production speed, reduced waste, and enhanced quality control that larger and more technologically advanced equipment can provide.

The correct choice highlights that as firms grow, they can invest in these large-scale production techniques, ultimately decreasing the average cost of production. This concept is fundamental in understanding how firms can leverage size to achieve competitive advantages in the market.