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Explain the different types of economies of scale - Discuss which economies are likely to occur as a result of a) horizontal integration b) vertical integration.
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Samantha Goolden Explain the different types of economies of scale. Discuss which economies are likely to occur as a result of a) horizontal integration b) vertical integration. Economies of scale are said to exist when in the long run (all factors of production are variable) costs fall as output increases. This is due to firms expanding in size and output, which causes the long run average costs to fall. These economies of scale are experienced as the business expands until a point is reached where average costs are constant as output increases. After this point if the business expands anymore, it is likely to experience diseconomies if scale and decreasing returns to scale will set in. Therefore the long run average cost curve is U-shaped. Economies of scale are reached through a variety of ways. Different sources of economies of scale are technical economies, managerial economies, purchasing & marketing economies and financial...
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