Micro Econ?

Identify situations of economies and diseconomies of scale and define a firm's minimum efficient scale

Economies of scale is when the cost of a unit falls as output increases. It usually happens when a firm increases it's business and find way to make their product cheaper to make.

For example they buy their inputs in bulk, or they can use more advance machinery. Also they start creating managerial positions to specialize in certain aspects i.e. production, financial, or human resources.

Diseconomies of scale is when the cost per unit increases as output increases.

It caused by poor communication. As you can imagine with a bunch of managers and a large hierarchy.

There is a lack of control of workers. A CEO can't see if a lowly worker is slacking off as easily as a owner in a bakery can. Also specialized worker tend to be less motivated to work.

Coordination is very difficult in a large firm especially if the production is complex .

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