Economics Cost Of Production Questions
There are three main types of economies of scale:
1. Internal economies of scale: These occur within a firm as it grows and expands its operations. Examples include cost savings from increased specialization, improved technology and machinery, and bulk purchasing discounts.
2. External economies of scale: These arise from factors outside the firm's control, such as industry-wide improvements in infrastructure, access to skilled labor, or the development of a specialized cluster of suppliers. All firms in the industry can benefit from these external factors.
3. Diseconomies of scale: These occur when a firm becomes too large and experiences inefficiencies and increased costs. Examples include coordination problems, communication breakdowns, and difficulties in managing a large workforce.