Which of the following describes the concept of 'scale economies'?

Scale economies, also known as economies of scale, refer to the cost advantages that a business experiences when it increases its level of production. Specifically, as a company produces more units of a good or service, the average cost per unit typically decreases. This decline in average cost occurs for several reasons, including the spreading of fixed costs over a larger number of units, operational efficiencies arising from larger production processes, and negotiating better rates for bulk purchases of materials.

In contrast, increased output leading to higher average costs does not correctly represent the definition, as it implies inefficiencies that are not characteristic of scale economies. Decreased demand with increased production suggests a scenario where supply exceeds demand, which can negatively impact costs and does not reflect the advantages of scaling up production. Lastly, balanced production and consumption rates do not specifically address the financial implications of production increases and do not provide insight into cost advantages that scale economies highlight. Thus, the concept of scale economies is best captured by the notion of cost advantages arising from increased production.