Economies and diseconomies of scale

Question 1

define economies of scale

Answer 1

as the scale of production increases the long run average cost falls

Question 2

define internal eos

Answer 2

cost saving resulting from the growth of the firm itself that is the scale of production increases

Question 3

define external eos

Answer 3

cost saving resulting from the growth of the economy or market of which the firm is apart

Question 4

types of internal eos

Answer 4

• research and development
• financial
• technical
• marketing
• managerial
• purchasing
  -training

Question 5

types of external eos

Answer 5

• education + training
• infrastructure
• technology
• research and development

Question 6

define diseconomies of scale

Answer 6

when an increase in the scale of production the long run average cost rises

Question 7

diseconomies of scale arises from

Answer 7

managerial
communication failures
motivational dis eos of scale

Question 8

what are natural monoplies

Answer 8

not all firms have U shaped LRAC some have L shaped

Question 9

whys is the LRAC L shapred

Answer 9

producing an extra unit of output will never raise AC, the FC are so large that the MC of an additional unit will never be greater than the average

Question 10

define minimum efficient scale

Answer 10

the lowest output which the firm is able to produce at the minimum achievable LRAC

Question 11

what is mes

Answer 11

a barrier to entry