Can You Explain Economies And Diseconomies Of Scale? Give Examples Of Each.
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Economies and diseconomies of scale are two opposite concepts. An economy of scale is the point at which the quantity produced by the company gives the company the low cost advantage and at this point the company incurs the minimum cost advantage.On the other hand when the production is less than the proportion of the input then the costs of production increases and it leads to diseconomies of scale. Average cost is high in the diseconomies of scale. For example, if a fast food restaurant buys potato in bulk and it produces French fries from it. If the outlet buys potato in bulk then up to a certain level it will be economy of scale while if it buys a huge bulk and it does not incur much sales then the investment in input is the extra cost incurred which is diseconomies of scale
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