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In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. The concept of diseconomies of scale is the opposite of economies of scale.
Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to a firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function.
Specialized business. These businesses gain benefits from both economies of scale and differentiation (often characterized by experience effects in their own, differentiated, segment); examples being branded foods and cosmetics. The main strategies are focus and segment leadership. Fragmented business. These organizations also gain benefit from ...
Scope economies, or economies of scope, describe the aspect of production wherein cost savings result from the scope of an enterprise, as opposed to its scale (see economies of scale). Meaning, there are economies of scope where it is less expensive for firms to combine two or more product lines into one, than it is to produce each product ...
Economic models can be such powerful tools in understanding some economic relationships that it is easy to ignore their limitations. One tangible example where the limits of economic models allegedly collided with reality, but were nevertheless accepted as "evidence" in public policy debates, involved models to simulate the effects of NAFTA ...
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In mainstream microeconomics, the returns to scale faced by a firm are purely technologically imposed and are not influenced by economic decisions or by market conditions (i.e., conclusions about returns to scale are derived from the specific mathematical structure of the production function in isolation). As production scales up, companies can ...
This makes scale economies an antitrust barrier to entry, but they can also be ancillary. [1] The per-unit cost will be lower in scale economies due to the spread of fixed costs to larger volumes, technology efficiencies and better supplier terms, therefore new entrants join the industry either on a large scale or at a cost disadvantage. [8]