economies of scale

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  • Created by: Tom
  • Created on: 07-01-14 21:00
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  • Economies of Scale
    • Definition
      • A fall in long run average total costs
    • Technical
      • indivisability?
      • Long run, ATC is lowered due to increased capacity or efficiency
      • e.g. a larger plane will be greater productively efficient and will use less fuel ... reducing ATC
    • Managerial
      • Employment of specialized e.g. managerial staff
      • Large firms
        • Improves efficiency, lowers ATC
      • Small firms
        • Do not employ specialized staff as is leads to indivisability
    • Financial
      • Large firms are seen as lower risk, for loans for investment
      • small infant firms are seen as high risk, as they are a start up
    • Purchasing
      • large firms have a greater purchasing power compared to smaller firms

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