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CONSTANTZA MARITIME UNIVERSITY MARITIME AND MULTIMODAL TRANSPORT MANAGEMENT Class of 2003/2004 BASES OF TRANSPORT ACTIVITIES - ECONOMICS OF SHIPPING TAKE HOME EXAMINATION STUDENT DUMITRU CARAGHEORGHE CONSTANTA 2004 TASK 1 In economics, the term economies of scale refers to a situation where the cost of producing one unit of a good or service decreases as the volume of production increases. Economies of scale tend to occur in industries with high capital costs in which those costs can be distributed across a large number of units of production. The exploitation of economies of scale helps explain why companies grow large in some industries, why marketplaces with many participants are sometimes more efficient and how a natural monopoly can often occur. It is also a justification for free trade policies, under the idea that a large unified market presents more opportunities for economies of scale. There is a multitude of advantages conffered by the economy of scale. These include: (a) Indivisibilities in inputs. When inputs are lumpy...

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