Question

How to determine economies of scale?

Answer 1

• When more units of goods and services are produced in a large scale, with lesser input costs, economies of scale are said to be achieved.
• As company grows and increases its production units, a company will have a good chance to decrease its cost.
• Economies of scale is determined by dividing the percentage change in cost with percentage change in output.
• Economies of scale occurs when increase in output results in decrease in unit costs with input costs remaining same.
• Two types of economies of scale are: internal and external.
• Economies of scale refers to the cost advantage achieved by a firm when it increases its output.
• Economic growth is experienced when economies of scale are realized.
• Division of labor and specialization are two key means to achieve a greater return on production.
• With such efficiency, time and money can be saved while production level increases.
• As there are economies of scale, diseconomies of scale also exists.