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Economies
of
scale
represent
the
potential
benefits
of
having
a
operation
.
In
theory
,
larger
operations
are
able
to
production
,
buy
higher
of
goods
in
bulk
,
and
rely
on
process
efficiencies
.
When
these
benefits
are
captured
,
it
is
said
that
a
company
is
capitalizing
on
economies
of
scale
as
it
is
accomplishing
more
efficient
use
of
resources
due
to
its
.
The
size
of
the
business
generally
when
it
comes
to
economies
of
scale
.
The
larger
the
business
,
the
its
cost
savings
.
Economies
of
scale
can
be
both
internal
and
external
.
economies
of
scale
are
based
on
management
decisions
,
while
external
ones
have
to
do
with
outside
factors
.
Internal
functions
include
accounting
,
information
technology
,
and
,
which
are
also
considered
operational
efficiencies
and
.
Economies
of
scale
are
an
important
concept
for
any
business
in
any
industry
and
represent
the
and
competitive
advantages
larger
businesses
have
over
smaller
ones
.
Most
consumers
don't
understand
why
a
business
charges
for
a
similar
product
sold
by
a
larger
company
.
That's
because
the
cost
per
depends
on
how
much
the
company
produces
.
Larger
companies
can
produce
more
by
spreading
the
cost
of
production
over
a
larger
amount
of
goods
.
An
industry
may
also
be
able
to
dictate
the
cost
of
a
product
if
several
different
companies
are
producing
similar
goods
within
that
industry
.
There
are
several
reasons
why
economies
of
scale
rise
to
lower
per
-
unit
costs
.
First
,
specialization
of
labor
and
more
integrated
technology
boost
production
.
Second
,
lower
per
-
unit
costs
can
come
from
orders
from
suppliers
,
larger
advertising
buys
,
or
lower
costs
of
capital
.
Third
,
spreading
internal
function
costs
across
more
units
and
sold
helps
to
reduce
costs
.
Internal
Economies
of
Scale
Internal
economies
of
scale
happen
when
a
company
costs
internally
,
so
they're
unique
to
that
particular
firm
.
This
may
be
the
result
of
the
sheer
of
a
company
or
because
of
decisions
from
the
firm's
management
.
There
are
different
kinds
of
internal
economies
of
scale
.
These
include
:
:
large
-
scale
machines
or
production
processes
that
increase
productivity
:
discounts
on
cost
due
to
purchasing
in
bulk
:
employing
specialists
to
oversee
and
improve
different
parts
of
the
production
process
:
spreading
risks
out
across
multiple
investors
:
higher
creditworthiness
,
which
increases
access
to
capital
and
more
favorable
interest
rates
:
more
advertising
power
spread
out
across
a
larger
market
,
as
well
as
a
position
in
the
market
to
negotiate
Larger
companies
are
often
able
to
achieve
internal
economies
of
scale
?
lowering
their
costs
and
raising
their
production
levels
?
because
they
can
,
for
example
,
buy
resources
in
bulk
,
have
a
patent
or
special
technology
,
or
access
more
capital
.
External
Economies
of
Scale
External
economies
of
scale
,
on
the
other
hand
,
are
achieved
because
of
external
factors
,
or
factors
that
an
entire
industry
.
That
means
no
one
company
controls
costs
on
its
own
.
These
occur
when
there
is
a
highly
skilled
labor
pool
,
subsidies
and
/
or
tax
reductions
,
and
partnerships
and
joint
ventures
?
anything
that
can
on
costs
to
many
companies
in
a
specific
industry
.
Job
shops
produce
products
in
groups
such
as
shirts
with
your
company
logo
.
A
significant
element
of
the
cost
is
the
.
In
job
shops
,
larger
production
runs
lower
unit
costs
because
the
set
-
up
of
designing
the
logo
and
the
silk
-
screen
pattern
are
spread
across
more
shirts
.
In
an
assembly
factory
,
per
-
unit
costs
are
reduced
by
more
seamless
technology
with
robots
.
A
restaurant
kitchen
is
often
used
to
how
economies
of
scale
are
:
more
cooks
in
a
small
space
get
in
each
other's
way
.
In
economics
charts
,
this
has
been
illustrated
with
some
flavor
of
a
U
-
shaped
curve
,
in
which
the
average
cost
per
unit
falls
and
then
rises
.
Costs
rising
as
production
grows
is
termed
"
diseconomies
of
scale
.
"
Economies
of
scale
are
beneficial
across
various
industries
,
including
manufacturing
,
technology
,
e
-
commerce
,
and
retail
stores
.
Explore
examples
of
how
these
industries
can
take
advantage
of
economies
of
scale
:
:
They
can
achieve
economies
of
scale
by
investing
in
the
latest
technology
to
improve
the
efficiency
of
the
manufacturing
process
.
:
Moving
toward
selling
cloud
computing
products
rather
than
physical
products
is
more
efficient
.
You
can
sell
software
without
developing
a
unit
for
each
point
of
sale
,
similar
to
selling
a
computer
,
for
example
.
:
When
running
large
-
scale
,
companies
benefit
from
the
ability
to
reach
a
larger
audience
.
Although
a
larger
campaign
comes
with
higher
costs
,
it
also
reaches
far
more
people
,
leading
to
sales
growth
.
:
It
chooses
to
purchase
products
in
bulk
has
the
advantage
of
reducing
its
cost
per
unit
,
which
makes
it
possible
to
lower
pricing
to
attract
customers
,
or
maintain
prices
and
improve
profit
margins
.
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