It is cheaper to produce more at a time at a lower production cost per unit.
- indivisibility indivisibility
- Just because you make half the amount does not mean you have to pay half the cost. Example: blast furnace
- Benefits of Division of Labor
- Hiring a large number of workers and having them specialize in a field generates benefits from the division of labor.
- experience curve
- Industries that are labor-intensive and where the same work is done over and over again will increase productivity as workers become more proficient.
- But I think those jobs will be replaced by computers in the future.
- What is experience curve - Cotobank
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another approach - Economies of scale of plant facilities - Talk about indivisibility. - Economies of scale - economy of scope - (1) Efficiency by producing related products together - (2) Efficiency gains by purchasing raw materials in bulk (Buyer’s bargaining power) - (3) Advertising efficiency and corporate brand effect - (4) Efficiency and knowledge sharing by consolidating research and development - (5) Efficiency by consolidating transportation and sales - (6) Decrease in transaction costs per amount due to the larger size of the financing
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Large economies of scale can lead to barriers to entry and cause [market failure
What are economies of scale - Cotobank
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