Eos and DoS

Question 1

DoS (diseconomies of scale) meaning

Answer 1

As output increases, AC increases

Question 1

EoS (economies of scale) meaning

Answer 1

As output increases, AC decreases

Question 2

Examples of EoS

Answer 2

Purchasing - bulk buying
Technological - using capital instead of labour reduces costs
Marketing - advertising costs spread over 1000s of items, AC is tiny
Managerial - large firms supply exports who are better and make less mistakes
Financial economies of scale - borrowing costs for large firms are lower due to low risks

Question 3

Examples of DoS

Answer 3

Communication - the more people who need to hear the message, the more likely it is to go wrong + mistakes made. AC increases
Coordination - workers are hard to control due to businesses being big, workers may not work hard enough. AC increases

Question 4

External EoS

Answer 4

Firm stays the same size but INDUSTRY grows causing firms AC to fall

Question 5

External DoS

Answer 5

Firm stays the same size, but INDUSTRY grows causing AC to rise

Question 6

Examples External EoS

Answer 6

Transport links - Once infastructure is completed, reduces cost for firms
R + D - Local Unis will do research into those industries, this will help firm save money

Question 7

Examples External DoS

Answer 7

Congestion - increases costs of labour and fuel
FoP - lots of demand for FoP causes AC to rise