Costs and Scale of Production | Baamboozle - Baamboozle

English 16 Public

Let's review how are costs classified, economies and diseconomies of scale

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#Business #economy #costs

How are costs classified?

fixed, total, variable, average costs

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what are fixed costs?

costs that do not change with output

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what are variable costs?

costs that change with output

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what are total costs?

variable and fixed costs added together

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what are average costs?

the cost of producinga single unit of output

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how do you calculate the average cost?

dividing the total cost (TC) by the total output quantity (Q)

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what do we mean by 'scale' in business?

the term 'scale' simply means the size of business operations

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what are economies of scale?

the reduction in average costs as a result of increasing the scale of operations

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what are the 5 types of economies of scale?

technical, financial, managerial, marketing, and purchasing

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how could we describe financial economies?

banks or lenders are more prone to lend money to larger business because they are "less of a risk"

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how could we describe managerial economies?

specialist managers improve quality of business decisions and make fewer mistakes than non-specialists

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how would you describe maketing economies?

while total marketing costs rise they do not rise at the same rate as sales output

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how could we describe purchasing economies?

larger businesses buy in larger quantities so they can get discounts from sellers

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how could we describe technical economies?

large businesses tenf to use flow production and this often times uses the latest technology (CAM)

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what are diseconomies of scale?

factors that cause average costs to rise as the scale of operations increase

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which are the three types of diseconomies of scale

poor communication, demotivation of workers, poor control

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