Economies and Diseconomies of Scale
Summary
- The video discusses economies and diseconomies of scale, which refer to the benefits and problems associated with the growth of individual firms or entire industries. When the scale of production increases, the cost per unit of output produced comes down, which is referred to as economies of scale. This can happen due to purchasing, technical, managerial, financial, and marketing economies of scale. However, when firms get too big, they can experience diseconomies of scale due to problems with communication, coordination, and control. Similarly, whole industries can experience external diseconomies of scale due to pollution, traffic congestion, and competition for factors of production. The relationship between average cost and scale of production can be shown on a diagram.
Add comment
Comments