Answer to Question #47375 in Microeconomics for imany

Question

Define economies of scale and give two reasons why firms may experience economies of scale. Economies of scale is a long-run concept or a short-run concept?

Answer 1

In microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.
Economies of scale are the result of: (1) increased resource specialization, (2) decreased resource prices, (3) increased bi-product use, (4) increased auxiliary activities, and (5) the geometric relation between volume and area.
Economies of scale is a long-run concept.