| Term | Definition |
|---|
| economies of scale | costs fall as the firm gets benefits from operating at a larger level |
| diseconomies of scale | Once the firm reaches its optimum or most efficient level, any further expansion will causee costs to rise as the firm has grown too large |
| External economies of scale | falling average costs of production shown by a downward shift in the average cost curve, which result from a growth in the size of the industry within which a firm operates |
| Internal economies of scale | economies of scale which arises because of the growth in the scale of production within a firm |
| minimum efficient scale of production | the lowest level of output at which long run average cost is minimised |
| optimal level of production | the range of putput over which long run average cost is lowest |
| Technical economies | arise from what happens in the production process |
| Managerial economies | arise from specialization as firms become more efficiently |
| Purchasing and marketing economies | larger firms are able to buy raw material in bulk therefore lower average costs and also from their marketing operations |
| financial economies | larger firms are able to raise finance for new investment |
| Solution for diseconomies of scale | 1. Reduce the size of the business by closing factories, shops and offices that making workers unemployed; 2. Split the business up into a number of smaller businesses each with their own managers, workers |
Combine with other sets
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