GENERAL KNOWLEDGE

Detailed explanation-1: -Economies of scale are the advantages that can sometimes occur as a result of increasing the size of a business. For example, a business might enjoy an economy of scale concerning its bulk purchasing. By buying a large number of products at once, it could negotiate a lower price per unit than its competitors.

Detailed explanation-2: -Economy of scale examples A large retail store can buy in bulk and lower their cost per unit. They can then choose to keep the savings to increase the business’ profits or to use the savings as a competitive advantage by passing the savings on to the consumer and offering lower prices than their competitors.

Detailed explanation-3: -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-4: -Economies of scale are cost savings that a company (and, by default, its customers) can reap as a result of efficient production processes. Generally, these cost savings are achieved because the average cost of producing something falls as the volume being produced increases.