Economies of Scale - Essay Example

Extract of sample
Economies of Scale

This concept is popularly known as 'Economies of Scale'. Many firms in different sectors of the economy are experiencing the economies of scale by virtue of expanding their economic activities to a greater level. The economies of scale may be internal or external. Internal economies of scale are experienced within the same firm while external economies of scale are experienced in the same industry. In this paper the internal economies of scale are discussed in detail in the Section-I. Subsequently disadvantages of the economies of scale for a firm as well as for the consumers of the firms experiencing economies of scale are described in the section-II and III. Finally the implications of the regulatory authorities on the concept of 'minimum efficient scale' has been described in section-IV.
If the average cost per unit of input falls per unit increase in the output, then the firm is said to be enjoying the internal economies of scale. This in other words it can be expressed as a percentage change in all inputs leads to a greater percentage change in outputs. Here average total cost (ATC) first decreases because fixed cost such as buildings, equipments and management expenses remains constant and have been utilized to their optimum. The total cost is spread over a greater range of outputs. ...
Download paper


The concept of small is beautiful can hardly be accepted in this globalised economy when there is fierce competition among the firms for marketing similar type of products. At that point one factor plays a key role in keeping the products moving, is its 'price'…
Author : ibalistreri
Download 1

Related Essays

International Business
Globalization has led to integration of global production (global sourcing and coordination between the diverse locations) and integration of global markets (the rise of global brands and international distributors). Ultimately, globalization yields to increasing: culture convergences; interdependence among states economic integration; trade liberation; and, global capital markets (Hill 2012, p.4). Globalization of markets Globalization of markets delineates the progression witnessed in the assimilation and amalgamation of different world markets into a shared market. This means that national...
3 pages (753 words) Essay
Minimum Efficient Scale
The MES is hardly ever a solitary output - more likely it is a range of production levels where standard cost is minimized where the firm achieves regular returns to scale. It varies from industry to industry depending on the type of the cost structure in a particular segment of the market. When the proportion of fixed to variable costs is very elevated, there is huge potential for dropping the average cost of production.
5 pages (1255 words) Essay
Economies of Scale and International Trade
As the report states that the pricing behavior of a company is generally assumed to be based on the motive to maximize profit. Pricing decisions may not be expected to influence that of other companies in a large economy. The two major factors considered in setting a price that maximizes profit are the ‘elasticity of demand’ and the ‘marginal cost’. A key factor that determines the elasticity of demand as a variable is the output. It therefore becomes necessary to fix a ‘profit-maximizing output’ as well as a ‘profit-maximizing price’.
4 pages (1004 words) Essay
SLP 4 - Strategic Choices
This will ensure that the products produced are of satisfactory quality to consumer and that the cost incurred is the lowest we can spend as affirm. We must also look at other factors such as the specific needs of the consumer in order to be able to achieve our goal. This will also help us to attain brand loyalty from our
2 pages (502 words) Essay
discussion question-essay
The firm now sales game consoles and games, smartphones, and laptop computers. GameStop also competes directly with Best Buy. The organization is the industry leader in the sale of video games. Its market share in the video game industry surpasses 40%. The firm has over 6,000 stores located across the United States, Canada, Europe, and Australia. The main advantage that GameStop has over Best Buy is the number of locations since Best Buy only has 1,023 stores. A third major competitor of the company is Radio Shark with 4,423 stores and overall revenues of $4 billion. Radio Shark does competes...
1 pages (251 words) Coursework
international business in emerging economies
Increased foreign contribution augments the employability, per capita income and living standards of these economies. The best emerging market for Pasta World Inc.’s foreign business expansion will be China. The context of the research has shown that the restaurant industry of China is highly competitive in nature. In order to lead within the aggressive market, Pasta World must rely on effective product and process differentiation. The researcher has recommended that franchising is the best market entry option for Pasta World Inc. because, it is less expensive and less risky approach of...
8 pages (2008 words) Assignment
Got a tricky question? Receive an answer from students like you! Try us!