Question

In: Economics

Which of the following companies will likely find it most necessary to realize economies of scope...

Which of the following companies will likely find it most necessary to realize economies of scope through high volume sales?

One with low fixed costs

One facing high fixed costs

Ones paying efficiency wages

Ones NOT paying efficiency wages


Ones facing inelastic demand

Solutions

Expert Solution

Ans: Companies with low fixed cost are more likely find it ,most necessary to realize economies of scope through high volume sales.

When large section of a products or goods can be manufactured on a huge scale, there will be fewer input costs, and threfore economies of scale are mention to be attained.

On the other hand, When the company build up and manufacturing sections productivity increase, a company will have a more chance to decrease its costs. Therefore, according to this theory, economic growth may be reached when economies of scale are understand.

And also when we discuss about some inputs, such as analysis and growth,publicity, and also the skilled employees, are very expensive, but because of the Chance of expanded efficiency in productivity with such inputs, they can assist to a decrease in the average cost of mass production and selling. so that if a company can develop the cost of such inputs over an increase in its production sections, economies of scale can be understand.

for example:

And if we take an example of fast food chain, If they chooses to spend more money on technology to finally increase productivity by decreasing the average cost of hamburger company, so they would have to increase the amount of hamburgers they produces in a year in order to cover the increased technology expenses.

thanks....


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