r r r r r r r r r r r r r r r r r r r r r r r rr ew concepts in microeconomics‚ if any‚ are more fundamental to business strategy than economies of scale and the closely related economies of scope. Economies of scale allow some firms to achieve a cost advantage over their rivals. Economies of scale are a key determinant of market structure and entry. Even the internal organization of a firm can be affected by the importance of realizing scale economies. We mostly think about economies of scale as
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lower unit costs without much overt concern about quality and consumer satisfaction. Now‚ a new view of the productive enterprise has emerged. The new view focuses more on quality and customer satisfaction as the driving forces to long term business success. Terms such as TQM and KAIZEN have become the buzzwords of the business community. Although the focus has shifted‚ the result is the same. A business that focuses on continuous improvements is likely to find reduction in unit costs along the way
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Q6 - Answer any 3) A. 3 Mark questions Short questions which demand answer not more than a paragraph and which test the understanding of concept of the contents prescribed in the syllabus. Answering this should not take more than 4 minutes by an average student. B. 5 Marks questionsSemi-descriptive questions which demand answer not more than two paragraphs and which test the understanding of concept and / or scope of the
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It is a supplier in market for goods and services. It has to adjust its production to satisfy the demand curve of its customers at profit. It is assumed that the firm or the owner of the firm always strives to produce efficiently‚ or at lowest cost. He will always attempt to produce the maximum level of output for a given dose of inputs avoiding waste whenever possible. Production function The production function is the relationship between the maximum amount of output that can be produced
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firms increase their scale of production. Hence‚ they incur lower average costs of production‚ either through specialization or other factors. When average costs fall‚ giving the price of the good to be constant‚ profit margins of these firms will be increased. Thus‚ the individual firm benefits from internal economies of scale. External economies of scale arise when all firms in an industry experience decreasing average costs of production‚ which can be due to economies of concentration‚ information
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Business Economics‚ the short run is defined as the concept that within a certain period of time‚ in the future‚ at least one input is fixed while others are variable and the long run is defined as a period of time in which all factors of production and costs are variable. The law of diminishing returns is a short run concept‚ which states that increasing successive units of a variable factor to a fixed factor will increase output but eventually the addition to output will start to slow down and would
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afternoon at the art gallery‚ paying $5 for her bus fares and $11 for food and drinks rather than spending an equal amount of money to go to a movie and have a similar meal at a similar price. The opportunity cost of going to the art gallery a. b. c. d. e. is less than the opportunity cost of going to the movies. equals $5 because she would have had a meal anyway. is the money she spent. is the movie she didn’t see.* is zero‚ if there is no fee to enter the art gallery. The following
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decide to have more children. This indicates there is an increase in the number of buyers‚ therefore increase in its demand. (b)A strike by steelworkers raises steel price Steel prices increases due to workers’ strike‚ the cost of input increase‚ so the supply decreases (c)Engineers develop new automated machinery for the production of minivans Advances in technology allow more output production with the same amount of resources resulting in increase of supply.
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4PRODUCTION AND THE COSTS OF PRODUCTION 5080260350 Chapter in a Nutshell 00 Chapter in a Nutshell In general‚ a firm’s production may take place in the short-run or the long-run period. The short run is a period in which the quantity of at least one input is fixed and we can vary the quantities of the other inputs. The long run is a time in which all inputs are considered to be variable in amount. The relationship between physical output and the quantity of resources used in the production
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scale are the cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (unit) costs of production. Economies of scale‚ in microeconomics‚ refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size
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