Short Notes: Economies of Scale
Posted by Ripon Abu Hasnat on Tuesday, May 27, 2014 | 0 comments
Most
economic production requires the producing firm or organization to make an
initial investment (in real capital, in engineering and design, in marketing)
before even the first unit of production occurs. As total production then grows, the cost per
unit of that initial investment shrinks.
For this reason, most industries demonstrate economies of scale, whereby
the unit cost of production declines as the level of output grows. Because of economies of scale, larger
companies have an advantage in most industries, and the economy usually
operates more efficiently when it is busy and growing (than when it is
shrinking or stagnant).
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