Explain what economies of scale are, Microeconomics

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Explain what economies of scale are and why they have become increasingly common in later years.

Economies of scale - Enhance in fixed factors, but output enhances at a proportionately higher rate than unit costs

  • internal economies of scale

a)  Technical economies of scale - spreading of fixed costs, improved use of capital

b)  Managerial economies of scale - higher efficiency in firms production units by specialisation

c)  Purchasing economies - bulk buying, good customer prices

d)  Marketing economies of scale - advantages of having broad brand-name recognition

e)  Financial economies of scale - larger asset base for security in loans, lower interest

 


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