Economies & Diseconomies of scale (3.4)

Question 1

Economies of scale

Answer 1

as output rises, long run average costs fall

Question 2

Diseconomies of scale

Answer 2

as output rises, long run average costs rise due to firm becoming too big (coordination and communication issues)

Question 3

External economies of scale

Answer 3

Occurs outside the business but still within industry & benefits all in industry

Transport infrastructure & research development firms improvements