Friday, 27 September 2013

External Economies of Scale

External Economies of Scale

This is a fall of a firm’s average costs as the industry in which they operate increases in size. The firm does not get bigger

  • Skilled Labour – as an industry grows in size, firm’s training costs will fall as it becomes easier to find workers which already have the necessary skills
  • Infrastructure – more likely to be built to benefit large industries
  • Ancillary Servicessupplies will benefit from economies of scale allowing them to cut prices for a larger industry
  • Cooperationcommunication between firms is easier in a ‘hub’. They are more likely to coordinate and place larger orders or work together on some projects