Economies of Scale in Iranian Economy: Manufacturing Sector

Although economists and entrepreneurs had been aware of the impact of economies of scale on average cost, no comprehensive theory was introduced until 1950s. Economies of scale is used by economist as a practical measure for evaluating the extent of competition (monopoly) in real markets. There are two primary aims of this paper: 1) To introduce theoretical aspects of economies of scale, 2) To investigate the extent of exploitation of economies in manufacturing sector of Iranian economy. This study found that firms in Iranian Economy did not gain economies of scale. This result can be explained by the small size of firms. Furthermore, empirical evidence from this study suggests that there is a conflict between economies of scale and competition in manufacturing sector of Iran. In addition, there is an association between firm size and rate of return namely, the closer the firm size is to MES, the larger the firm return.