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Economics resits !! - Coggle Diagram

- - - - Occur for a firm when an increase in a firms scale of production leads to production at a lower long-run average cost
        
        One example being division of labour, in which becomes big enough to take advantage of this and specialise workers to increase production efficiency. Some sources of EOS industry specific, thus some sectors of the economy exhibit more EOS than others. I.e., no hairdressing salons that come into top 10 largest firms, but there are many oil companies.
        
        Another example of source of EOS is the technology of production. More advanced transporting systems allow for more proportionally efficient use of space, for example a larger ship can carry proportionally a higher volume of items compared to a smaller one etc.
    - - There are many economic activities in which there are high overhead expenditures. These do not vary directly with the scale of production. I.e., building a factory is going to cost the same regardless of the amount of output that is produced in it.
        
        Some economic activities where overhead costs are significant. I.e., the Channel tunnel, construction (overhead) costs enormous compared to cost of running trains through it.
      - natural monopoly- monopoly that arises in an industry in which there are such substantial economies of scale that only one firm is viable
    - - Internal economies of scale- EOS that arise from an expansion of a firm
        
        External economies of scale- EOS that arise from an expansion of the industry in which a firm is operating
  - - - Stages of production- primary sector the extraction of raw materials (e.g. mining). Secondary sector (manufacturing things e.g. cars). Tertiary sector (the provision of services e.g. retailers)
    - - Horizontal integration, when business takeovers/merges with a business in the same industry and at the same stage in the production process as them (e.g. supermarket with another supermarket)
        
        Conglomerate integration, Expanding into a another sector than the business is in. Allows businesses the chance to expand into different markets which they may have struggled to compete in through organic growth .
    - - Organic growth :
        
        Reduced risk - reduced risk of enduring effects of mergers and takeovers (e.g. a clash of business cultures)
        
        Helps avoid diseconomies of scale - allows business to grow at more sustainable pace, therefore less chance for increased costs due to DOS.
        
        Slow growth - takes longer for business to increase its market share, by which point there competitor may have grown through a merger/takeover and dominating market.
        
        Vertical integration :
        
        Guarantees source of raw materials or outlet for product- G