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Economies of Scale

In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale. Companies achieve economies of scale by increasing production and lowering costs. This occurs because costs are spread over a larger number of goods. Costs in economies of scale are both fixed and variable.

Further Reading


Are there economies of scale in underwriting fees? Evidence of rising external financing costs
academic.oup.com [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

Economies of scale and economies of scope in multiproduct financial institutions: Further evidence from credit unionsEconomies of scale and economies of scope in multiproduct financial institutions: Further evidence from credit unions
www.jstor.org [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

The timing and terms of mergers motivated by economies of scaleThe timing and terms of mergers motivated by economies of scale
www.sciencedirect.com [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

Economies of scale and local government financeEconomies of scale and local government finance
www.jstor.org [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

Economies of scale in financial institutions: A study in life insuranceEconomies of scale in financial institutions: A study in life insurance
www.jstor.org [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

Economies of scale and scope at large commercial banks: Evidence from the Fourier flexible functional formEconomies of scale and scope at large commercial banks: Evidence from the Fourier flexible functional form
www.jstor.org [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

A fundamental approach to estimating economies of scale and scope of financial products: The case of mutual fundsA fundamental approach to estimating economies of scale and scope of financial products: The case of mutual funds
link.springer.com [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

Economies of scale and scope in European bankingEconomies of scale and scope in European banking
www.tandfonline.com [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …

On economies of scale in credit unionsOn economies of scale in credit unions
www.jstor.org [PDF]
… F - International Economics; G - Financial Economics; H - Public Economics; I - Health … M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics; N - Economic History; O - Economic Development, Innovation, Technological Change, and …



Q&A About Economies of Scale


How do fixed costs affect economies of scale?

Fixed costs remain constant irrespective of changes in output levels while variable costs vary with changes in output levels. Therefore, as production increases from Q1 level to Q2 level for example; average total cost decreases because fixed cost remains constant while variable cost decreases proportionately with increase in output levels from Q1 level to Q2 level for example. This results into a decline in average total cost from AC1 amount at Q1 level to AC2 amount at Q2 level for example . As a result , firms operating on lower average total costs enjoy economies of scale . Thus , they have higher profit margins than firms operating on higher average total costs .

How does a complete graph depict one-on-one communications between employees?

A complete graph depicts a number of channels that grows more rapidly than the number of workers, thus increasing the time and costs for communication.

What does economies of scale refer to?

Economies of scale refers to cost advantages obtained by enterprises due to expansion.

How does this relate to diseconomies of scale in business?

The same concept applies to businesses as it does with one-on-one communications between employees.

What do these factors include?

They include fixed costs, variable costs and average total costs.

How do variable costs affect economies ?

Variable

What is the opposite of economies of scale?

Diseconomies of scale.

What do we call the concept first introduced by Adam Smith?

We call it economies of scale.

Who said there are certain factors affecting the size at which an industry can achieve maximum efficiency and minimum cost per unit?

Adam Smith said so in his book, ""The Wealth Of Nations.""

What are some characteristics that lead to diseconomies of scale?

Some characteristics include one-on-one communication between all workers and time and cost of communication.

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