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5.4 1 Louis Nesmith Mgmt 420 Management of Production & Operations 11/19/2017 Professor: Dr. Albert Atkins
5.4 2 Assignment 5.4 Provide and discuss some examples of economies and diseconomies of scale in a college environment. “Economies of scale are achieved when the average unit cost of a good or service decreases as the capacity and/or volume of throughput increases. Diseconomies of scale occur when the average unit cost of the good or service begins to increase as the capacity and/or volume of throughput increases” (Collier & Evans, 2013. p. 205-206). Collier and Evans uses a hotel to explain each of these concepts. For example, as the hotel expand the cost per room decreases because the fixed cost is allocated over more rooms. This will support building larger facilities with more capacity. This would be an example of economies of scale. Now, let us use a hotel once again but as the number of rooms increase the average cost per unit begins to increase because of the larger amounts of overhead and operating expenses required by higher levels of such amenities as restaurants, parking, and recreational facility exists where costs are at a minimum. This is an example of diseconomies.

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