Economies Of Scale

Question 1

Economies of scale

Answer 1

Are the benefits a firm experiences when they increase their scale of production in the form of falling average costs

Question 2

Types of EOS

Answer 2

Bulk buying (Purchasing)
Managerial
Technical
Financial
Marketing
Risk bearing

Question 3

Diseconomies of scale

Answer 3

Are the disadvantages a firm experiences when they increase their scale of production in the form of average rising costs

Question 4

Internal DOS (4)

Answer 4

• Communication
• Control
• Co-operation
• Co-ordination

Question 5

X-Inefficiency

Answer 5

When there is a lack of competitors average costs are higher

Question 6

External EOS

Answer 6

Factors that occur outside the businesses control that cause average costs to fall

Question 7

Examples of external EOS (3)

Answer 7

• Nearby high education standards (industry specific)
• Proximity of suppliers
• Better infrastructure: easier to access for suppliers, customers and workers

Question 8

Economies of agglomeration

Answer 8

Proximity to need services such as solicitors and banks

Question 9

External DEOS

Answer 9

Factors that occur outside the businesses control that cause average costs to rise

Question 10

External DEOS examples (3)

Answer 10

• More competition for raw materials
• Congestion for logistics and workers
• Suppliers move further away