Difference between revisions of "Economies of Scale"
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A more detailed explanation is this. "Economics of scale" is the decrease in a firm's long-run average costs as the size of its production increases. Reasons for such a decrease can include reduced unit costs of inputs (as in the Wal-Mart example), more efficient utilization of equipment (as in 24-hour usage), and greater specialization of resources (as in a more specialized workforce). | A more detailed explanation is this. "Economics of scale" is the decrease in a firm's long-run average costs as the size of its production increases. Reasons for such a decrease can include reduced unit costs of inputs (as in the Wal-Mart example), more efficient utilization of equipment (as in 24-hour usage), and greater specialization of resources (as in a more specialized workforce). | ||
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Revision as of 10:14, March 11, 2007
"Economies of scale" is the increased efficiency when doing something on a larger scale. For example, a large store like Wal-Mart benefits from "economies of scale" so that it can provide cheaper goods than a small store can.
A more detailed explanation is this. "Economics of scale" is the decrease in a firm's long-run average costs as the size of its production increases. Reasons for such a decrease can include reduced unit costs of inputs (as in the Wal-Mart example), more efficient utilization of equipment (as in 24-hour usage), and greater specialization of resources (as in a more specialized workforce).