economies of scale

Question 1

economies of scale and different types

Answer 1

-reduction in long run average cost as output increases
-interanl Eos (within businesses) cost rises less than q
Risk bearing: as they get larger, can spread opportunity cost
Financial: negotiate lower rates of interest, lower risk
Managerial: employ specialist managers
Technical: bring in specialist machinery
Marketing: bulk buy advertising
Purchasing: able to buy raw materials in bulk
-external economies of scale:
better transport infrastructure
component supplies move closer
r and d firms move closer

Question 2

diseconomies of scale

Answer 2

-an increase in LRAC as output rises
issus (3 Cs and M)
-control: difficult to control workers
-communication: harder to spread messages
-co ordination
-motivation: not feel like value