top of page

Large Firms vs. Small Firms: Average Costs of Production


Discuss whether a large firm will always have lower average costs of production than a small one.


Market Structures and Competition

Frequently asked question

Preview Answer

I. 🍃Introduction
- Definition of economies of scale
- Importance of understanding the advantages and disadvantages of economies of scale

II. Advantages of economies of scale
- Purchasing/buying economies
- Technical economies
- Managerial economies
- Selling economies
- Financial economies
- Research and development economies
- Spreading fixed costs over high output
- Access to cheap labor abroad

III. Disadvantages of economies of scale
- Diseconomies of scale
- Problems managing the firm
- Poor communication
- Poor industrial relations
- Opportunity cost
- Switching resources from producing consumer goods
- Lower living standards in the short run
- Less likely to receive government support
- Higher rates of tax

IV. 👉Conclusion
- Summary of advantages and disadvantages of economies of scale
- Importance of considering both sides when making business decisions.

Ops... End of preview!

Already purchased Economics Study Pack subscription? Amazing! Click below

What's included 
✔️Full essay
✔️Marking Schemes
✔️Examiner's report

Economics Study Help
bottom of page