Economies And Diseconomies Of Scale Flashcards
1
Q
ECONs of scale:
A
Reduction in unit costs achieved as the scale of production increases
2
Q
Diseconomies of scale:
A
Inc in unit costs as a result of scale production
3
Q
Internal growth
A
A firm grows naturally by increasing its size to satisfy inc in demand
4
Q
External growth:
A
A fir is able to grow quickly by merging with or taking over another business.
5
Q
Internal ECONs:
A
Achieved as a result of a film growing internally
6
Q
External ECONs
A
Achieved by a firm as a result of growth within the industry in which it operates.
7
Q
Advantages of external and internal ECONs
A
- labour/ expertise within the geographical area
- relocation of key supply businesses
- investment in infrastructure
- links with unis and other research businesses
- efficient production
- reduces production costs
- buy in bulk
- Lower unit/average costs
- likely inc in sales
- reduction in logistics costs
- spread risks
- cheaper capital
8
Q
Internal diseconomies of scale
A
Inefficient management Technical difficulties Production diseconomies Marketing diseconomies Financial diseconomies
9
Q
External diseconomies of scale
A
Pollution
Scale and infrastructure
High factor prices
