Economies and Diseconomies Of Scale

Question 1

Economies Of Scale

Answer 1

Economies Of Scale is when a business grows they get bigger discounts on larger products. They can then buy these products and sell them for a profit.

Question 2

Diseconomies Of Scale

Answer 2

Diseconomies Of Scale is when a business passes their equilibrium of output and cost per unit. If the company goes past this then it will mean that cost per unit rises marginally.

Question 3

How could Diseconomies of Scale negatively impact the control Area of a business?

Answer 3

The negative impact that Diseconomies Of Scale can have on a business is the level of control higher workers have. For example, there could be problems in monitoring quality control and productivity control. This may even affect customer service as workers may feel like they can get away with everything and won’t tolerate a customer being rude to them.

Question 4

How could Diseconomies of Scale negatively impact the Coordination Area of a business?

Answer 4

There could be a situation where two agents in the company have varying different ideas to each other and the aim is to try to reach an outcome in which those interests are satisfied. Informally, this is a situation in which each person has an interest in doing something that chimes in with what the others do.

Question 5

How could Diseconomies of Scale negatively impact the Communication Area of a business?

Answer 5

As a business expands communication between the different chains of command becomes much more difficult. Due to the space between departments messages could be distorted when travelling across. This may result in workers not understanding the exact job they are doing.

Question 6

What negative impacts could economies of scale have on a business?

Answer 6

1 Poor Communication
2 External Opposition
3 Loss Of Profit
4 Weak Morale
5 Duplication Of Effort