8. Production, Costs & Revenue - Economies & Diseconomies of Scale

Question 1

What are the two different types of economies of scale?

Answer 1

Internal economies of scale and external economies of scale

Question 2

What are internal economies of scale?

Answer 2

This is when an individual firm gains from the cost benefits of being big and growing

Question 3

What are external economies of scale?

Answer 3

This is when the whole industry gains from the cost benefits of being bigger or growing

Question 4

What is the definition of economies of scale?

Answer 4

These are the cost benefits the firm receives as costs decrease as output increases – the cost benefits of being bigger

Question 5

What are the five internal economies of scale?

Answer 5

Risk bearing, financial, managerial, marketing, and technical

Question 6

What may cause industries to benefit from external economies of scale?

Answer 6

If a new airport or piece of infrastructure is introduced to an area surrounding industries will benefit. Also, falling transportation and raw material cost will benefit the whole industry.

Question 7

What are diseconomies of scale?

Answer 7

This is when a firm or industry suffers from increasing costs relative to output - caused by inefficiencies in production etc

Question 8

What are the internal diseconomies of scale?

Answer 8

Cooperation, communication, control and coordination

Question 9

What are external diseconomies of scale?

Answer 9

The same as the external economies of scale but reversed

Question 10

CHECK THAT THERE ISNT MORE ON THIS IN ECONPLUSDAL’S VIDEO

Answer 10

CHECK THAT THERE ISNT MORE ON THIS IN ECONPLUSDAL’S VIDEO