3.3.3 economies and diseconomies of scale

What are economies of scale?

Advantages of large scale production which allows large buisnesses to produce at lower avg costs than a smaller business
Thus firm is able to experience increasing returns to scale where an increase in inputs by a certain % will lead to a greater % increase in output.

What are diseconomies of scale?

Disadvantages in large businesses as long-run average total cost rises as the quantity of output increases
The firm experiences decreasing returns to scale where output increases by a smaller % than inputs.

What is constant returns to scale?

Where firms increase inputs and receive an increase in output by the same %

What is minimum efficient scale?

the minimum level of output needed for a business to fully exploit economies of scale.
Point where LRAC curve first levels off and when constant returns to scale is first met.

What is internal economy of scale?

Advantage that form can enjoy because of a growth in the firm

What are technical economies?

Arise as result of what happens to production process.
Specialisation

What is specialisation in terms of technical economies?

Large firms will be able to appoint specialist workers and buy specialist machines which can do their jobs better and more quickly than unspecialised machines/ workers.

What is balanced teams of machines in terms of technical economies?

Large firms can afford to buy a number of every kind of machine for each stage of production. By combining these machines