Economies of scale refers to the benefits that a firm enjoys due to expanding its scale of production.
Internal economies
- Administration: When a firm expands, its administrative expenses are distributed over greater output and the per unit cost decreases.
- Financial: Large firms have a good reputation hence can get loans from financial institutions.
- Marketing: Large firms sell their products easily since they are able to engage in sales promotion methods
- Technical: Due to their financial capacity, large firms can afford capital goods that enables them to produce superior products.
(Visited 32 times, 1 visits today)
Share this: