Answer to Question #80094 in Microeconomics for Usman

Question

Concept of economies of scale

Answer 1

The essence of Economies of Scale is to change the cost of production per unit of output as a result of increased production volumes. Considered in the long run.
The Economies of Scale can be both positive and negative.
A positive Economies of Scale occurs when the size of the organization and the number of products produced increases, the cost per unit of output decreases. Usually connected with the deepening of the division of labor. Due to this effect, it was very advantageous to switch from manual labor to manufactory and then to conveyor.
The negative Economies of Scale is observed when the average costs increase as the company grows. Associated with some loss of manageability.