The Average Cost Curve (ACC) in the long run represents the average cost per unit of output, taking into account the optimal production technology and scale. It is crucial for understanding economies of scale and business optimization.
A bulk discount is a reduction in price offered by sellers to buyers who purchase goods or services in large quantities.
The cost per unit of production that a firm sustains at varying levels of output.
An economic phenomenon where unit costs of production decline as the scale of operation or output volume increases, often due to factors like economies of scale and increased efficiency in production processes.
Economies of scale refer to the cost advantages that a business obtains due to expansion, which result in the reduction of per-unit costs as the scale of operation increases.
The Experience Curve is a production phenomenon where unit costs decline as volume increases. This concept highlights the cost advantages gained from efficiency improvements, skill enhancements, process optimizations, and material cost reductions associated with increased production.
Horizontal integration refers to the strategy where a company acquires, merges, or takes over another company operating at the same level of the value chain in the same industry. The primary aim is to reduce competition, increase market share, and achieve economies of scale.
A characteristic of a production process that becomes more efficient at larger levels of output. The marginal cost of producing each additional unit decreases, often due to high fixed costs relative to marginal costs.
A natural monopoly occurs in an industry where the most efficient producer is a single entity, typically due to high fixed costs and significant economies of scale. Most natural monopolies are utilities or similar entities.
Returns to scale refer to how the change in production output responds to a proportional change in all input factors. It is crucial in understanding the efficiency and scalability of production processes.
The Scale Effect refers to the cost advantages that a business obtains due to the size, output, or scale of its operation. Primarily, the cost per unit of output generally decreases with increasing scale as fixed costs are spread out over more units of output.
A service bureau is a service business that makes its resources, such as computers and skilled personnel, available to others for a fee. They provide various services including merge/purge, list maintenance, and fulfillment services. By leveraging economies of scale, service bureaus can offer these services at a lower cost than individual users could achieve on their own.
