A firm enjoying economies of scale is said to be reducing average cost as production increases. This means that as the firm produces more output, it experiences a decrease in the average cost of producing each unit. Economies of scale can arise from various factors such as specialization, technological advancements, and increased bargaining power with suppliers. As a result, a firm that is able to enjoy economies of scale is able to produce and sell its output at a lower cost than its competitors, which can give it a competitive advantage in the market.