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economies of scale
as output increases LRAC falls
Economies of scale definition
The cost advantages a firm gains due to the scale of their production
diseconomies of scale
as output increases, LRAC increases
internal EoS defenition
Changes in LRAC due to sn increase in scale or size within a firm
external EoS defenition
Change in LRAC due to growth of the market or industry that a firm is part of
types of internal EoS
Managerial EoS - more specialist managers
Marketing EoS - bulk buying, negotiating power, spread advertising costs
Technical EoS - spread R&D costs, capital/volume economies
types of internal DEoS
managerial DEoS - administration difficulties, inefficient lower level managers
communication failure - disconnect between low and high level staff - unawareness also workers feel unappreciated → lower productivity
Divorce of ownership and control
motivational DEoS
relationship between RtS and EoS
increasing returns to scale results in economies of scale
external EoS and DEoS
EoS - cluster effects ie silicon valley → supply of skilled labour, attracts supporting industries, sharing of knowledge and ideas
DEoS - drive up wages
L shaped LRAC
constant EoS, eg natural monopolies
what is the minimum efficient scale of production
producting at the powist possible point or section of LRAC
Note 
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