Economies of scale (micro)

Question 1

Internal economies of scale

Answer 1

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Risk bearing
Financial
Managerial
Technical
Marketing
Purchasing

Question 2

External economies of scale

Answer 2

Ancillaries
Reputation
Infrastrcture
Skilled labour

Question 3

What are Ancillaries

Answer 3

Complementary industries support the business

Question 4

What is meant by economies of scale

Answer 4

Cost advantages when a firm increases its output and becomes more efficient

Question 5

What is meant by diseconomies of scale

Answer 5

Negative effects that occur when a firm becomes too large and inefficient causing higher costs per unit

Question 6

Types of diseconomies of scale

Answer 6

Internal - Control
-Coordinate
-Communicate
External - more competition for raw mats
-causing more pollution likely to have to pay for

Question 7

What is the minimum efficient scale

Answer 7

Lowest level of output where costs are minimised

Question 8

What is meant by internal economies of scale

Answer 8

cost advantages as a result of a company’s growth/ productive potential increase

Question 9

What is meant by external economies of scale

Answer 9

Cost advantages of a firm as a result of growth of the industry it is in