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Costs in the long run:Costs in the long run:
economies of scaleeconomies of scale
Learning outcomes
Understand the
economist’s
concept of the
long run
Understand the different
sources of economies of
scal...
What have these in common?
Colour printers for
under £30
Free scanners
Keyboards for less
than £10
A mouse for the same
pr...
The benefits of mass production
Firms that are able to increase their SCALE of
production are able to benefit from lower U...
The impact of increasing scale
Unit cost
SRAC
(scale 1)
Output
SRAC
(scale 2)
SRAC
(scale 3)
A larger
scale of
production
...
The long run average cost curve
Unit cost
LRAC
Output
Economies of scale Diseconomies of scale
Minimum
Efficient
Scale of
...
Internal economies of scale
Technical
Purchasing
and
marketing
Managerial
Financial
Risk bearing
Task 1
Use your textbooks and other
resources to describe each of
the internal economies of scale
on the last slide.
Quick quiz
The following quiz is designed to
help you to assess whether you
have understood the terms and
concepts so far....
Task 2
Read the information on the car
industry and answer the
questions set.
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Costs in the long run eo s

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Costs in the long run eo s

  1. 1. Costs in the long run:Costs in the long run: economies of scaleeconomies of scale
  2. 2. Learning outcomes Understand the economist’s concept of the long run Understand the different sources of economies of scale Explain what is meant be economies of scale
  3. 3. What have these in common? Colour printers for under £30 Free scanners Keyboards for less than £10 A mouse for the same price as a mouse mat CD and DVD players for less that £40!
  4. 4. The benefits of mass production Firms that are able to increase their SCALE of production are able to benefit from lower UNIT COSTS in the long run. The benefits of a larger scale of production are known as ECONOMIES OF SCALE Long run average cost falls as the scale of production rises
  5. 5. The impact of increasing scale Unit cost SRAC (scale 1) Output SRAC (scale 2) SRAC (scale 3) A larger scale of production allows a firm to operate on a lower short run average cost curve (SRAC)
  6. 6. The long run average cost curve Unit cost LRAC Output Economies of scale Diseconomies of scale Minimum Efficient Scale of production (MES)
  7. 7. Internal economies of scale Technical Purchasing and marketing Managerial Financial Risk bearing
  8. 8. Task 1 Use your textbooks and other resources to describe each of the internal economies of scale on the last slide.
  9. 9. Quick quiz The following quiz is designed to help you to assess whether you have understood the terms and concepts so far. Review your notes outside lessons if the quiz shows gaps in your understanding
  10. 10. Task 2 Read the information on the car industry and answer the questions set.

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