Economies/ Diseconomies Of Scale Flashcards
1
Q
What is economics of scale?
A
As output grows = lower AC
2
Q
What are internal economies of scale
A
Arise because of the growth in output of the firms itself as it expands its own operations = reducing AC
3
Q
Types of internal economies of scale
A
technical EOS = use of specialised equipment, manufacturing
4
Q
What is external economies of scale
A
arise from factor outside the firm because of the growth in the size of the industry or the business environment in which the firm operates = reducing LRAC for individual firms
5
Q
What is diseconomies of scale
A
As output continues to grow = lower AC
6
Q
Types of diseconomies of scale
A
managerial diseconomies = larger firms - management becomes overt complex and less efficient
