Economies of Scale
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4 Terms
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When do economies of scale occur?
When mass producing of a good results in lower average cost.
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What are internal economies of scale?
As a business grows, its costs will fall due to internal economies of scale.
An ability to produce units of output more cheaply.
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What are external economies of scale?
Economies of scale shared by a number of businesses in the same industry in a particular area.
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Why do diseconomies of scale occur?
When average costs start to rise with increased output.
These occur when firms become too large or inefficient.