Types of Economies of Scale

Economies of Scale

A fall in the long run average costs of production as output rises

Internal Economies of Scale

The unit cost advantages from a business expanding the scale of production in the long run

Financial economies of scale

As a firm grows it has better access to loans at low costs

Risk-bearing economies of scale

As a firm expands it can develop a range of products which spreads risk and minimises impacts of downturns

Marketing economies of scale

As a firm expand it is able to use a central brand marketing to advertise the range at little extra cost

Managerial economies of scale

As a firm expands it can employ specialist managers in various departments which increases productivity and lowers long-run average costs

Purchasing economies of scale

As a firm grows it can purchase factor inputs in bulk at lower prices

External Economies of Scale

The cost advantages of production that extent beyond an individual firm and benefit multiple firms in a specific industry or area

Minimum Efficient Scale

The optimum level of production that occurs at the lowest point on the average cost curve

Diseconomies of Scale

A rise in the long run average costs of production as output rises