Economies Of Scale Scope Essay

Economies of Scope An economic theory stating that the average total cost of production decreases as a turn out of increasing the number of different goods produced.For example, McDonalds can produce both hamburgers and French fries at a lower average cost than what it would cost two separate firms to produce the equal goods. This is because McDonalds hamburgers and French fries shargon the use of food storage, preparation facilities, and so forth during production.Another example is a keep company such as Proctor & Gamble, which produces hundreds of products from razors to toothpaste. They can spread to hire expensive graphic designers and marketing experts who will use their skills across the product lines. Because the costs are spread out, this lowers the average total cost of production for each product.Economies of descale are the cost advantages that a business can exploit by expanding their scale of production. The effect of economies of scale is to reduce the average (u nit) costs of production. Here are some examples of how economies of scale workTechnical economies of scaleLarge-scale businesses can afford to invest in expensive and specialist capital machinery. For example, a supermarket chain such as Tesco or Sainsburys can invest in technology that improves stock control. It might not, however, be viable or cost-efficient for a small corner shop to buy this technology. Specialisation of the workforceLarger businesses cave in complex production processes into separate tasks to boost productivity. By specialising in certain tasks or processes, the workforce is able to produce more output in the same time.