Explain the external economies of scale
Explain the external economies of scale.
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External or pecuniary economies to huge size firms occur from the discounts available to this because of:
1. Huge scale purchase of raw materials
2. Huge scale acquisition of external finance at low interest
3. Lower advertising rate at fun advertising media.
4. Concessional transport charge upon bulk transport.
5. Lower wage rates when a large scale firm is monopolistic employer of exact type of specialized labour.
Therefore External economies of scale are strictly based upon experience of large –scale firms or well managed minute scale firms. Economies of scale will not carry on forever. Expansion within the size of the firms beyond a exact limit, so much specialization, inefficient supervision, offensive labour relations etc will go ahead to diseconomies of scale.
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When, for a specified output level, an absolute or perfectly competitive firm's price is less in that case its average variable cost, so the firm: w) is earning a profit. x) must shut down. y) must increase output. z) must increase price. Discover Q & A Leading Solution Library Avail More Than 1441562 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1949142 Asked 3,689 Active Tutors 1441562 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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