Why economies of scale occur?



Economies of scale

Economies of scale describes a situation when the cost per unit decreases as large quantity of product is produced

As the production increases the cost per unit decreases in the long run

 

Why economies of scale occur

Financial economies

The business is able to get discount by buying in bulk

Technical economies

The business can buy more efficient machinery

Managerial economies

The business is able to employ skilled managers






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