(a) What Is economies of scale? (b) Outline three internal economics of scale a firm can enjoy (c) State three factors that can influence where a firm is si...

Answer Details

(a) Economies of scale refer to the cost advantages that a firm can enjoy by producing goods or services in large quantities. As the scale of production increases, the average cost of production per unit decreases, resulting in increased efficiency and profitability for the firm.

(b) The three internal economies of scale that a firm can enjoy are:

1. Technical economies: These refer to the cost savings that result from using more advanced technology or specialized machinery in production.
2. Managerial economies: These refer to the cost savings that result from hiring specialized managers or using more efficient management techniques.
3. Marketing economies: These refer to the cost savings that result from advertising and promoting products on a large scale, which can reduce per-unit costs.

(c) The three factors that can influence where a firm is sited are:

1. Availability of resources: Firms may choose to locate near sources of raw materials, labor, or other key resources to reduce transportation costs and improve efficiency.
2. Market access: Firms may choose to locate near their customers to reduce transportation costs and improve responsiveness to market needs.
3. Infrastructure: Firms may choose to locate in areas with good transportation networks, such as ports, highways, and airports, to facilitate the movement of goods and services. Additionally, access to reliable utilities such as electricity and water may also influence a firm's decision to locate in a particular area. Overall, the location of a firm can significantly impact its success and competitiveness in the market.