Economies of Scale

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  • Created by: Frances
  • Created on: 27-05-13 17:17

What are economies of scale? Economies of scale are the cost advantage gained through producing on a larger scale.

Internal economies of scale - Lower long run unit costs are achieved within a firm with higher output. As a firm produces more, so long run average cost falls because of technical, marketing etc. factors.

What are external economies of scale? Falling long run average costs that benefit all firms in an industry, as a result of their location.

Technical economies of scale - Increased physical capacity or a technological development that results in lower long run average costs. For example: passenger and freight transport through larger vehicles that carry more at a reduced average cost.

What are purchasing economies of scale? Are reduced unit costs…


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