MGEC40H3 Chapter 2: Chapter 2 textbook ( 4th edition)
Document Summary
economies of scale & scope: exist whenever large-scale production has a cost advantage over small processes. Ie landscaping & tailoring don"t have substantial scale economies. affect the size of firms, structure of markets, they are fundamental to diversification & merger strategies. affect pricing, entry/exit, & the ability of the firm to secure a long tern sustainable advantage. economies of scale: exists when ac declines as output increases. exists if the firm achieves unit cost savings as it increases the production of a good or sevice. which implies that the mc of the last unit produced is < ac. ( mcac , ac increases as q increases. ac curve: shows the relationship between ac and q. it"s a u curve. Ac decline over low levels of output & rise over higher levels of output.