Answer to Question #54927 in Microeconomics for see yin yee

Question

Why do you think the motorcar production exhibits economies of scale but not the trucking (haulage) industry?

Answer 1

In the motorcar production fixed costs take a large part of total costs. So if we produce more motorcars the same amount of fixed costs is divided by more quantity of production units. As a result cost of one motorcar production becomes less, comparing to cost of previous unit production. In trucking industry opposite situation in cost sharing - variable costs take the main part of total costs. So economies of scale effect is almost absent here.