One of the primary sources of diseconomies of scale is the inefficiencies associated with
One of the primary sources of diseconomies of scale is the inefficiencies associated with managing large scale operations.
76) "Learning by doing" results in decreased average costs of production and is illustrated by a downward shift of the firm's long-run average cost curve.
77) Failure to account for the increased transportation costs that would result from building fewer and more centrally located production facilities could result in firm managers selecting a scale of operation that is larger than the optimum.
78) The "minimum efficient scale" of operation in an industry is defined as the scale of operation in an industry that is least efficient.
79) Consideration of the minimum efficient scale of operation would suggest that, to minimize production costs, the market should be served by a large number of small firms when the LRAC curve slopes downward over the relevant range of output.
80) The text considers three methods that can be used to obtain empirical estimates of long-run costs in different industries. Of those three, surveys of expert opinion are considered to be most reliable because they are less subject to bias than the other two methods.
81) Most of the empirical research on long-run costs suggests that the long-run average cost curve for most firms has a very pronounced U-shape.
82) Over the past several decades, technological change has led to a significant amount of consolidation in the U.S. brewing industry.
83) Empirical evidence suggests that economies of scale, advertising and image differentiation, and risk spreading all help account for the large-scale production that exists in many sectors of the economy.
84) Regarding the production of health care, more recent studies suggest that economies of scale exist up to a hospital size of approximately 200 beds.