ECO 201-SLP-Mod 4 - DEMAND UTILITY AND MARGINALITY TUI UNIVERSITY ANGELA GILBERT MODULE 4 SUPPLY PRODUCTION COSTS AND PROFITS SLP ECO 201 MICROECONOMICS

ECO 201-SLP-Mod 4 - DEMAND UTILITY AND MARGINALITY TUI...

This preview shows page 1 - 3 out of 5 pages.

DEMAND: UTILITY AND MARGINALITY 1 TUI UNIVERSITY ANGELA GILBERT MODULE 4: SUPPLY: PRODUCTION, COSTS, AND PROFITS- SLP ECO 201 MICROECONOMICS DR. LISA MOHANTY 12 December 2014
DEMAND: UTILITY AND MARGINALITY 2 How do firms benefit from economies of scale? Economies of scale are advantages that arise for a firm because of its larger size, or scale of operation. These advantages eventually translate into lower unit costs (or improved productive efficiency), although some economies of scale are not so easy to quantify. In many markets today, firms have to be of at least a certain size to be able to compete at all, because of the minimum level of investment required; economists call this minimum efficient scale. On the other hand, inefficiencies can also creep in because of increased size, known as diseconomies of scale. In the correct sense of the term, economies and diseconomies of scale relate to advantages and disadvantages of an increase in the firm’s productive capacity – such as moving to a larger factory or installing completely new technology. Do not confuse these terms

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture