economies of scale

Question 1

economies of scale

Answer 1

benefits which result in the cost savings of large scale operations which come about when a business expands

Question 2

two types of economies of scale

Answer 2

internal -savings in cost when a firm expands and external-cost savings which are external to the firm

Question 3

types of internal economies of scale

Answer 3

technical economies of scale-division of labour increases output
risk bearing economies of scale
marketing economies of scale
financial economies of scale

Question 4

types of external economies of scale

Answer 4

a supply of skilled labour may locate near to a firm, causing the firm to save costs in labour and training
subsidiary industries- supporting firms that help to save cost. e.g repair and maintenance firms near an oil refinery

Question 5

diseconomies of scale

Answer 5

when firms attempt to expand beyond the ideal size that they begin to suffer certain disadvantages, which eventually cause cost of production to rise.

Question 6

types of internal diseconomies of scale

Answer 6

standardisation of the product- the large firm may use mass production to produce a standardised product that reduces customer choice
industrial relations- it is easier to unionise a large firm than a small firm. Wages and strike action will decrease costs.
Implementation-there is excessive red tape involved in decision making