ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Result from changes in production techniques
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Increase due to the growth of the industry as a whole
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Generate lower unit costs
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Reduce production costs in the short run
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Detailed explanation-1: -Economies of scale occur when a company’s production increases in a way that reduces per-unit costs. Internal economies of scale can result from technical improvements, managerial efficiency, financial ability, monopsony power, or access to large networks.
Detailed explanation-2: -Internal Economies of Scale An internal economy of scale measures a company’s efficiency of production. That efficiency is attained as the company improves output when the average cost per product drops.
Detailed explanation-3: -Effects of Economies of Scale on Production Costs It reduces the per-unit fixed cost. As a result of increased production, the fixed cost gets spread over more output than before. It reduces per-unit variable costs. This occurs as the expanded scale of production increases the efficiency of the production process.
Detailed explanation-4: -Internal Economies of Scale. These are those which arise from the expansion of the plant size of the firm. They are specific to the individual firm. These are the unit cost advantages from expanding the scale of production in the long run.