The spatial concentration of economic activities is an notewortry phenomenon. The agglomeration economy is one of the most important reasons for spatial concentration. Eeconomic externality has important influence on spatial concentration. To expose the root of agglomeration economy, the behaviors of the main micro-economic body should be explored. Each city has an optimal size. The efficient size is determined by the equilibrium between the advantages and the costs of spatial concentration. In the course of urbanization, more attention should be paid to the function and efficiency of a city. Based on the increasing returns to scale and a simplified mono-centric urban model, this paper analyzes the influence of commuting costs and the degree of urban increasing returns to scale on the optimal city size. The paper discusses the relationship between urban income per capita and city size, and deduces that the optimal city size is determined by two opposite power. The paper points out that there is a inverse U relation between urban income per capita and city size under certain conditions; otherwise, if the degree of urban increasing returns to scale in urban aggregate production function is strong enough, the optimal city size is decided by commuting costs.