Respond to each classmate 100 word a piece.
Classmate 1
In the lecture economies of scales is defined as short run fixity vs long run flexibility.The textbook states that economies of scales are important for companies who are following a cost leadership strategy. Companies experience economies of scale when their cost per unit continuously falls as productions and the levels of output for that unit increase. When this happens companies should lower the prices on their product temporarily. This way production can increase. The price per unit can eventually be set back at its original price.
According to the text, when average cost is reduced profit increases. The average cost can effect the economies of scale. “ If long-run average costs are constant with respect to output, then you have constant returns to scale. If long-run average costs rise with output, you have decreasing returns to scale or diseconomies of scale.If long-run average costs fall with output, you have increasing returns to scale or economies of scale” ( Froeb et al., 2018). Average cost per unit can fall in the beginning of production when companies expand production in the beginning stages.
The main thing that companies need to do when dealing with this sorts of things is to pay close attention to everything. Proverbs 2:1-22 (King James Version) says, “ My on, if you receive my words and treasure up my commandments with you, making your ear attentive to wisdom and inclining your heart to understanding; yes if you call out for insight and raise your voice for understanding, if you seek it like silver and search for it as for hidden treasures, then you will understand the fear of the Lord and find the knowledge of God”.
Classmate 2
Economies of scale reaped by companies are cost advantages when production becomes reliable. This happens as a larger number of goods affected because costs are spread over. Costs can either be fixed and variable or both. Economies of scale matters a lot in the size of the business this generally matters when it comes to certain scenarios. The advantage arises when one considers the inverse relationship that holds between the quantity produced and the per-unit fixed cost. The lower the per-unit fixed cost and the greater the quantity of output produced.
Examples of economies (scale) include. To produce tap water, the water industries would have to put their cash in a huge network of water pipes spread-out throughout the country.
Characteristics
- At any stage of the production process the economies of scale can be realized by a firm.
- In its marketing division by hiring many marketing professionals, a business can decide to bring about economies of scale.
Types of Economics of scale
- 1. Internal Economies of Scale, this reveals that economies are unique to a firm.
- 2. External Economies of Scale- shows that the economies of scale can be adopted by a whole industry.
Output increases in economics of scale and average cost changes.
Economies of scale is the level of output that increases and refers to a particular situation where the average cost falls. Constant returns average cost does not change as output increases to scale.
We can note that the average fixed cost is fixed cost per unit of output. As the total number of units of the produced goods goes up, the average fixed cost falls because it’s spread over a larger number of units of output as the same amount of fixed costs
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