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Economics Assignment: Economies of Scale

   

Added on  2020-05-28

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Running head: ECONOMICS ASSIGNMENT Economics AssignmentName of the StudentName of the UniversityAuthor Note
Economics Assignment: Economies of Scale_1
1ECONOMICS ASSIGNMENT Table of ContentsAnswer 1:.........................................................................................................................................2Answer 2:.........................................................................................................................................4Answer 3:.........................................................................................................................................5Answer 4:.........................................................................................................................................7Answer 5:.........................................................................................................................................9Answer 6:.........................................................................................................................................9References......................................................................................................................................11
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2ECONOMICS ASSIGNMENT C0C1Q0Q1QACLRACAnswer 1: In terms of the conceptual framework of economics, the term “Economies of Scale”refers to the cost advantage, which the production firms enjoy with increase in their scale ofoperations. in general, there are two types of costs incurred by a firm in its production process,the fixed cost and the variable cost of production. With increase in the production of goods andservices, the per unit input costs of the production goes decreasing and the average fixed costalso falls per unit, which over time leads the firms to enjoy experience the Economies of Scale(Polkinghorn 2016). This can be shown with the help of the following figure: Figure 1: Economies of Scale due to falling Average Cost of Production(Source: As created by the author)
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3ECONOMICS ASSIGNMENT From the above figure, it can be observed that as the production of the firm increasesfrom Q0 to Q1, the average cost of production of the same also decreases from C0 to C1. Thus,with the increase in the production and with the consequent decrease in the average cost ofproduction, the firm starts enjoying Economies of Scale. There exists different types of market in economy, which differ in terms of the number ofbuyers and sellers, type of goods and services, distribution of market power; entry and exit easein the markets and others. Of this, the monopoly market is one with one seller and many buyers,which gives the seller the whole of the market power. The economies of scale also operate thebest in the monopoly marker. A producer in general becomes a monopolist owing to theadvantages it enjoys over its competitors in terms of cost and amount of production. In anaturally monopolistic firm, the presence of increasing returns to scale is related to its totalmarket share and control over inputs for production (Dunne et al. 2013).
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