Economies & Diseconomies of Scale

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Economies and Diseconomies of Scale
A case for McDonalds & Movie Theaters

Michele Tarrence
Econ 202

Economies of scale are defined as ‘forces that reduce a firm’s average cost as scale of operation increases in the long run. The opposite of this would be diseconomies of scale, meaning ‘forces that may eventually increase a firms average cost as the scale of operation increases in the long run. Most every company has both the economies and diseconomies of scale that can be analyzed. In the following paragraphs I will tell of some of these scales in both movie theaters and the ever popular McDonalds.

McDonalds is the 8th most valuable brands in the world. They have approximately 32,000 restaurants located in over 120 countries. Founded in 1955 and sold in 1961 as a franchise for $2.7 million. Now the company is just about on every corner you turn on. McDonalds has taken much criticism over the years for things such as promoting unhealthy eating, robbing the poor, damaging the environment, and many more. There are also those that praise the company for its many efforts that have enhanced the economy.

McDonalds faces many issues every day. Trying to make 32,000 restaurants uniform is not an easy task. Especially when you are spread out among many countries that have different cultures and religions and /or laws that need to be respected. For instance, in Saudi Arabia, they have to close five times a day for prayer because they are a Muslim society. India is another one that has laws to be followed. They do not use beef for their burgers because they worship cows in their country. Instead they use mutton. This company has brought about some positive changes to a host of countries. They are considered to be an agent of economic development. (Book-survey of economy). McDonalds has provided many jobs to people, entrepreneur opportunities, they have created a very large amount of suppliers, promote exports and they also create a...
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