Distinguish economies and diseconomies of scale. How can the extent to which economies and diseconomies of scale explain the size and number of real world firms in an industry?
What will be an ideal response?
Economies of scale exist when a firm increases its scale of operations and lower per unit costs of production are experienced. Diseconomies of scale exist when a firm increases its scale of operations and higher per unit costs of production are experienced. If economies of scale are extensive we would expect to find a small number of very large firms operating within the industry. Conversely, if diseconomies of scale set in relatively early, we would expect to find a large number of relatively small firms operating within the industry.
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Agreements among competing sellers to maintain a certain minimum price or to divide up the market in a particular way
A) are evidence of a cooperative rather than competitive spirit in business. B) are illegal under federal law where it is applicable. C) benefit business firms and their customers, but at the expense of employees. D) increase the number of job opportunities in the economy.
The combining of First Union National Bank and The National Bank of Memphis is an example of
A) a vertical merger. B) a horizontal merger. C) a downstream formation. D) a conglomerate merger.