BUSINESS ADMINISTRATION
STRATEGIC MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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producing and selling goods or services in high volumes which leads to lower per unit costs
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a large volume of economic power
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using money efficiently
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producing product at a higher quality more efficiently
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Detailed explanation-1: -Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between the per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost.
Detailed explanation-2: -What Are Economies of Scale? Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods. Costs can be both fixed and variable.
Detailed explanation-3: -Economies of scale means reduction in unit of production. Economies of scale refers to reduced cost per unit that arise from increased total output of a product. Was this answer helpful?
Detailed explanation-4: -There are two types of economies of scale: internal and external economies of scale. Internal economies of scale are firm-specific-or caused internally-while external economies of scale occur based on larger changes outside the firm. Both result in declining marginal costs of production, yet the net effect is the same.
Detailed explanation-5: -Economies of scale indicate a costs savings as production increases; in other words, a per-unit cost savings. However, the scale can tip the other way, resulting in diseconomies of scale, in which an increase in production costs more per unit. In many industries, there is a fixed setup/operational cost.