Economies of Scale
Millennials are renting offices sharing costs to reduce their overhead expenditures and overall efficiency. What are the disadvantages and advantages of economies of scales? Give examples of your local establishments that use shared locations to decrease costs, i.e., Taco Bell and KFC. Include a minimum of one reference.
Sample Answer
Economies of scale are the cost advantages that businesses experience when they produce a large number of goods or services. These advantages can come from a variety of factors, including:
- Increased efficiency: As businesses produce more goods or services, they can become more efficient in their operations. This can lead to lower costs per unit.
- Bargaining power: Larger businesses often have more bargaining power with suppliers, which can lead to lower prices.
- Specialization: Larger businesses can often specialize in certain tasks, which can lead to increased efficiency.