Describe an activity, process, or product of your company that exhibits economies or diseconomies of scale. Describe the source of the scale economy. How could your organization exploit the scale economy or diseconomy

Question

Business

Aisha Guerra

20 December, 15:08

Describe an activity, process, or product of your company that exhibits economies or diseconomies of scale. Describe the source of the scale economy. How could your organization exploit the scale economy or diseconomy

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Answers (1)

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Alana Morton · Answer 1

Economies & Diseconomies of Scale

Explanation:

Economies of scale is: When the quantity of products produced by a company is increased the cost to produce those products decreases.

For Example big companies buy the products in bulk, this process decreases the cost of per unit of a product because the marginal cost of delivering 10000 bags of rice is very low as compared to 100 bags of rice.

Diseconomies of scale is: When a company tries to expand beyond its optimum size or scale average costs increase.

For Example Large companies face poor communication between the departments, they have coordination problems, motivation level of workers is very low.