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Why might economies of scale be inappropriate undesirable or inaccessible for some firms?
Wiki User
∙ 11y ago
It is not just according to Wikipedia, but is a general economics principle of 'economies of scale' as you referred to in your additional details.
There could be many reasons for economies of scale to be inappropriate, undesirable or inaccessible for some firms. Taking all three situations collectively (inappropriate, undesirable or inaccessible), this may possibly be due to lack of demand, regulatory conditions by the state, shortage of capital/raw-material/equipments/required manpower/energy, cheaper supplies due to overseas dumping making it unfeasible to produce more, labour unrest, high inflation, state in the situation of war with other country......etc.
As usual in Economics, being all other conditions remaining conducive to production and consumption, the economies of scale hold good for one and all.
Wiki User
∙ 11y ago
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What is the outline of the benefits of free market economies to owners of firms?
what does the free market economies benefits to owners
Supporters of command economies claim that firms in market economies do not produce the goods and services wanted by the poor because?
firms produce only what people with money want and need.
Why do firms use specialisation and how do economies of scale benefit firms?
Specialisation is used by firms because of the extra effectiancy implied by this production process. It provides greater effeciancy as the employee specialises in doing that certain process more effectively than other workers who specialise in other areas, providing a well developed product. Economies of scale, refers to the cost advantages that a business obtains due to expansion. Expantion can be providesd by this extra effeciancy explained earlier, and this economies of graph scale can proves how this can benefit the firms.
What market characteristics suggests that purely competitive firms have only weak incentives to innovate?
Economies of scale
Why have market economies far exceeded all other types of economies in the production of new and better products?
In market economies, firms developing new and better products are often able to earn larger than normal profits.
What is the outline of the benefits of free market economies to owners of firms?
what does the free market economies benefits to owners
Supporters of command economies claim that firms in market economies do not produce the goods and services wanted by the poor because?
firms produce only what people with money want and need.
Why do firms use specialisation and how do economies of scale benefit firms?
Specialisation is used by firms because of the extra effectiancy implied by this production process. It provides greater effeciancy as the employee specialises in doing that certain process more effectively than other workers who specialise in other areas, providing a well developed product. Economies of scale, refers to the cost advantages that a business obtains due to expansion. Expantion can be providesd by this extra effeciancy explained earlier, and this economies of graph scale can proves how this can benefit the firms.
What market characteristics suggests that purely competitive firms have only weak incentives to innovate?
Economies of scale
Why have market economies far exceeded all other types of economies in production of new and better products?
In market economies, firms developing new and better products are often able to earn larger than normal profits.
Why have markets economies far exceeded all other types of economies in the production of new and better products?
In market economies, firms developing new and better products are often able to earn larger than normal profits.
Why have market economies far exceeded all other types of economies in the production of new and better products?
In market economies, firms developing new and better products are often able to earn larger than normal profits.
Monopolistically competitive firms may not be able to produce goods at the lowest possible average cost. This statement is describing how monopolistically competitive firms might be?
without economies of scale
If a firms enjoys economies of scale?
its average total cost will decrease as production increases question from e2020 test.
What are external economies?
Internal economies of scale arise when firms increase their scale of production. Hence, they incur lower average costs of production, either through specialization or other factors. When average costs fall, giving the price of the good to be constant, profit margins of these firms will be increased. Thus, the individual firm benefits from internal economies of scale. External economies of scale arise when all firms in an industry experience decreasing average costs of production, which can be due to economies of concentration, information and disintegration. Unlike internal economies of scale, external economies of scales independent on the size of the individual firms in the industry as both small and large firms benefit from it. Secondly, internal and external economies of scale depend on several factors. Internal economies of scale arise due to technical economies, which states that as a firm increases its scale of production, it is able to delegate specific jobs to its workers. Hence, through specialization in a single job, the workers are able to improve their productivity through attaining higher levels of dexterity and skill through repeated practices. Thus when productivity per worker rises, the firm is actually producing a greater amount of goods and hence, the average cost of the good falls. Of course, internal economies of scale also depend on other factors, such as marketing economies, which basically states that a firm making bulk purchases on raw materials would be able to enjoy cheaper prices, such as financial economies, which states that as a firm increases its scale of production and need funds to buy more factors of production, it can get it from a bank at lower interest rates. This is because its larger assets and greater selling potential provides banks with greater security. And there are also less important factors such as risk bearing and managerial economies. External economies on the other hand, depend on mainly three different economies. As mentioned above, economies of concentration states that when firms in an industry are located close together, they can enjoy the pool of skilled workers and infrastructure provided by local colleges and the government respectively. Hence, through the provision of such valuable manpower and infrastructure, firms are able to attain lower average costs of production by employing these skilled workers with high productivity, or using the efficient road and communications networks to reduce transport and managerial costs.
What are three reasons for the Europeans creating the airbus consortium?
compete against the US Aerospace firms; economies of scale, geographic reach
Types of economies of scale?
Five main types of internal economies of scale can be defined. 1. Technical economies. They are found mostly in plants and arise mostly because neither the capital cost nor the running cost of plants increase in proportion to their size. The main idea is to spread the fixed costs over as large output as possible, so AFC decreases. 2. Managerial or administrative economies arise because the same people can usually manage with bigger output, so average administrative cost decreases when production increases. Large firms can employ specialists, which leads to the increase in efficiency. 3. Financial economies arise because e.g. the interest rate for getting a loan is higher for smaller firm that for larger one. This is because large firms have large assets and bank trusts them more. It is also relatively easier for large firms to raise their share-capital by issuing shares. 4. Marketing economies. They are available both in purchases of raw material and in selling of the product. A large firm may have a bulk discount when purchasing raw materials. In terms of promotion, to large firms the average cost is smaller, because the prices of advertisements are the same for all firms. 5. Social economies. They may be developed into two groups: those which build up the goodwill of the community and so attract customer (sponsorship), and those that develop the loyalty of the firm's employers (Christmas bonuses). External economies of scale arise when there is a growth in the size of the industry and are available for many firms in it. There are three main types of external economies. 1. Economies related to a particular industry. They are derived from the concentration of the industry in one place and differ between industries. They might involve cheaper training facilities if many firms want to train their employers or marketing economies when several firms want the same kind of raw material. They can be realized through trade associations which are producers' unions, which can e.g. advertise the industry generally, thus raising the revenue of all the firms included. 2. Economies related to industrialization. If there is a great concentration in specific place, e.g. many people come to look for job there. Usually the communication expenses (maintenance of roads) can be shared. The activities of the essential services sector multiply, providing more advantages to firms in the industrialized area. 3. Economies related to society. The provision of roads, schools etc. is largely the responsibility of the state. As industrialization increases the provision of these items increases giving further advantages to firms in the area.
