Large scale production is considered to be economical in the sense of per unit cost. explain the statement by describing different types of economies of scale. give examples to substantiate your answer?
Question: Large scale production is considered to be economical in the sense of per unit cost. explain the statement by describing different types of economies of scale. give examples to substantiate your answer?
Large-scale production is considered to be economical because of the economies of scale that come with it. There are three main types of economies of scale: 1) technical economies, which arise from improvements in production methods and technology, such as using more efficient machinery; 2) managerial economies, which result from better coordination and specialization of labor as the business grows, such as hiring specialized managers; and 3) financial economies, which come from the ability to secure lower financing costs and negotiate better terms with suppliers due to increased bargaining power. Examples of economies of scale include a car manufacturer being able to reduce per-unit costs by building more cars on the same assembly line or a large retailer being able to negotiate lower prices from suppliers due to their large purchasing power.
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