Economies and Diseconomies of Scale (AQA A-Level Economics): Flashcards
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Economies of scale
Economies of scale
LRAC per unit falls as firm increases size
Diseconomies of scale
Diseconomies of scale
LRAC per unit rises when firm grows beyond optimal size
Internal economies of scale
Internal economies of scale
LRAC changes from changes in individual firm's size
External economies of scale
External economies of scale
Firm's costs fall due to entire industry expansion
Volume economies (technical)
Volume economies (technical)
Tank doubles, capacity increases eightfold
Marketing economies of scale
Marketing economies of scale
Bulk-buying and bulk-marketing advantages
Financial economies of scale
Financial economies of scale
Large firms borrow at lower interest rates
Economies of scope
Economies of scope
Cheaper to produce range of products together
Managerial diseconomies
Managerial diseconomies
Administration becomes difficult as firm grows larger
Minimum Efficient Scale (MES)
Minimum Efficient Scale (MES)
Lowest output where LRAC reaches minimum