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Economics FROM 4 ART

CHAPTER 1 : ECONOMICS OF SCALE

FACTORS THAT DETERMINES THE SIZE OF A FIRM
  • Availability of scale.
  • Extent of the Market
  • Nature of the Product.
  • State of technology
  • Entrepreneur.

Economic of scale: Economic of scale refers to the cost serving advantages we enjoy or gain as a result of an increase in size of production of output and economics of scale is classified into Internal economics and External economics of scale.

Internal Economics of scale : These are cost serving advantages which a firm will gain because of the expansion of the individual firm indepedndently of what is happening to other firms in the industry. It compresses of the fulling e.g Marketing economics, final economics, Welfare economics, risk-bearing economics, research economics, technical economics etc.

Marketing Economics :  When the firm grow in size it enjoy the economies of large scale purchase. They have an advantage of equality distance and trade distance. This is because layer business are capable of employing specialized” buyers and sellers”. They have the advantage of buying at lower prises and the liquid services. When firms grow in size the development new desired and better quality products.

Final Economies : Large firms loan to obtain opportunities of financial institution such as commercial Banks since they have a lot of collateral services which saves as guarantee for loans. Also they have possibility to borrow

par Claude Foumtum