economies + dis-economies of scale

Question 1

what is economies of scale?

Answer 1

Economies of scale are the cost savings a business experiences when it increases its output, due to the spreading of fixed costs or improved operational efficiency.

Question 2

what is dis-economies of scale?

Answer 2

Diseconomies of scale occur when a business grows too large and its average costs start to increase. This is the opposite of economies of scale.

Question 3

what is internal economies of scale?

Answer 3

Technical: More efficient machinery.
Purchasing: Bulk buying discounts.
Managerial: Hiring specialized managers.
Financial: Lower interest rates on loans due to business reputation.
Marketing: Advertising costs spread over more units.

Question 4

what is external economies of scale

Answer 4

The advantages of scale that
benefit a whole industry and not just an
individual business, e.g. more skilled workforce,
development of industry specific research and

Labour – the concentration of businesses may
lead to the build up of a labour force equipped
with the skills required by the industry

Question 5

what is internal dis economies of scale?

Answer 5

Communication problems: Harder to coordinate and pass messages efficiently in a large organization.
Loss of control: Management struggles to monitor all departments or employees effectively.
Low employee motivation: Workers may feel undervalued or like “just a number” in a big company, reducing productivity.
Slow decision-making: Bureaucracy increases with size, slowing responses and innovation

Question 6

What is external dis economies of scale?

Answer 6

Increased competition for limited resources like skilled labor or raw materials.
Traffic congestion or overcrowding in business hubs, slowing deliveries and logistics.