Download Notes Costs and Economies of Scale

Costs and Economies of Scale
Costs
Costs of Production are the ______________________________________________________________
_____________________. These may include wages, rent, raw materials, packaging, interest and advertising.
Total cost is the ____________________________________in getting the goods or service ready for sale.
Average cost of production is the____________________________. Equals total cost divided by output.
Economies of Scale
Even though the__________________________, the _________________________________
Productivity will increase because you are able to ____________________with the ___________________
When there are economies of scale there is a _________________________than the increase in ________
E.g. If there is a 5% increase in resources (inputs) but a 10% increase in production (outputs) then there are
economies of scale.
Reasons for Economies of Scale

Technical Economies
Bigger businesses are able to afford ____________________________________to increase productivity.
Smaller firms may be unable to afford this machinery. Larger firms are also able to benefit from __________
_________________________________________, such as division of labour, which increases productivity.

Marketing Economies
Many marketing costs (advertising) stay the same regardless of the output being produced. Larger firms can
__________________________________________________________________________
Larger firms can____________________, so can ______________________________from their suppliers
so cost per unit will fall ( supermarkets)
Larger firms can also _________________that ______________________________________________
Financial Economies
Larger firms have the benefit of being able to_______________________________. As larger firms usually
have ___________________so are seen as being______________________. Larger firms can also
________________________________________________________________________. Lowering the
average cost of production
Managerial Economies
Larger firms can employ ___________________________who can_______________________________
_____________________ For example one person could be employed as a manager to deal with staff,
another to deal with marketing and another for finance etc.
Diseconomies of Scale
This is due to inefficiency and problems with management, perhaps the ______________________________
______________or there are _______________________________
Management issues are the main cause of diseconomies of scale.

_________________________________between management and employees ( productivity may fall)

Workers may not feel __________________________________

Workers may become ________________________________
Consequences ( Flow On Effects)
Economies of scale result in _________________________
If the _________________________________it will result in a ________________________________,
______________________________ making a __________________________for the business.
Firms may decide to ________________________________of their product but at the same time _______
____________________________ the same. This makes goods ______________________________so
the firm will _______________________________________and increase its ______________________
__________________________________________
When diseconomies of scale arise the firm will____________________________________________. This
may result in ____________________________