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Economies of scale
as business grows, it can benefit from reduction in average cost of production, distribution + sales
Gives larger businesses competitive advantage over smaller one
Average costs
average cost of producing 1 unit of output
AC = Total cost/number of units produced (output)
must charge higher price than AC to make profit
Purchasing economies of scale
as business grows it can purchase raw materials/components in bulk, can enjoy savings on these bulk buy purchases
Technical economies of scale
as business grows it can purchase more sophisticated machinery/equipment to make it more efficient, also larger premises to produce/supply/distribute more
