An evaluation of the benefits from economies of scale in the global automobile industry.
Written in 2006; 970 words; 7 sources; MLA; $ 34.95
Paper Summary:
This paper discusses and evaluates the benefits of economies of scale (companies with huge production and supply capacity) in the global automobile industry. According to Alfred Marshall, there are two factors influencing the economies of scale, the internal and the external. This paper examines these two different factors.
From the Paper:
"It's clear that a company that provides economies of scale reduce the average cost per unit through increased production because of fixed costs, which are splitted up between increased number of goods. But it does not mean that all costs are decreasing likethe average. When average costs are falling the marginal cost must be below the average cost curve; when average costs are rising, the marginal cost must be above the average cost curve.
It's nessery to admit that the achieving of economies of scale in production can represent a deviation away from the assumption of perfectly competitive markets. In perfect competitive markets, it is assumed that production takes place with constant returns to scale. This means that the unit-cost of production remains constant even the scale of production increases. If that assumption is changed, it can open up the possibility of increasing profits and smart relations among entities."
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