Economies Of Scale Scope Essay Example for Free

Economies Of Scale Scope EssayEconomies of Scope An economic theory stating that the average total terms of production decreases as a result of increasing the number of different goods take a shitd.For example, McDonalds can produce both hamburgers and French fries at a pass up average cost than what it would cost two separate firms to produce the same goods. This is beca intake McDonalds hamburgers and French fries share the use of food storage, preparation facilities, and so fore during production.Another example is a company such as Proctor Gamble, which produces hundreds of products from razors to toothpaste. They can afford to hire expensive graphic designers and marketing experts who will use their skills across the product lines. Because the costs are spread out, this lowers the average total cost of production for each product.Economies of scale are the cost advantages that a subscriber line can exploit by expanding their scale of production. The effect of economie s of scale is to reduce the average (unit) costs of production. Here are some examples of how economies of scale work practiced economies of scaleLarge-scale businesses can afford to invest in expensive and specialist capital machinery. For example, a supermarket chain such as Tesco or Sainsburys can invest in technology that improves stock control. It might not, however, be viable or cost-efficient for a small corner shop to purchase this technology. Specialisation of the workforceLarger businesses split complex production processes into separate tasks to boost productivity. By specialising in certain tasks or processes, the workforce is able to produce more output in the same time.