What is a key benefit of scale for microenterprises?

Achieving scale is crucial for microenterprises because it often leads to reduced costs per unit. As a business increases production or service delivery, it can spread its fixed costs—such as rent, utilities, and equipment—over a larger number of goods or services. This reduction in unit costs enhances profitability and can allow the enterprise to offer competitive pricing, thereby attracting more customers and potentially expanding market reach.

When microenterprises manage to produce more efficiently, they can also benefit from bulk purchasing of materials or supplies, which typically comes with discounts and better terms from suppliers. This further reinforces the cost advantages of scale.

In contrast, increased tax liability, decreased customer demand, and narrowed bargaining power are not benefits associated with scaling a microenterprise. Increased tax liability is generally a consequence of higher earnings rather than a direct benefit of scale. Decreased customer demand can occur for various reasons but is not inherently related to business scale. Furthermore, narrowed bargaining power would likely emerge from larger businesses dominating the market rather than being a benefit for microenterprises. Thus, the key benefit of scale for microenterprises is clearly seen in the reduction of costs per unit.