Profit is the most important issue for a business, how to exploit the opportunities and maximize the profit has long been the top priority of the competition. Since the profit is simply the result by subtracting the expense from income, how to balance the relationship between input and output can be crucial and conclusive to a firm's competitiveness and development. This essay will examine the issue of economies and diseconomies of scale. After first describing the types, it will consider its effects. Then, the essay will assess firms' decision towards diseconomies of scale and provide solutions.
There are several types of economies of scale. One type of internal economies of scale is the Technical economies. Anderton (2000:320) states that the increasing and decreasing retributions to scale in return is the reason economies of scale exist, which is known as technical economies. They can arise in the production progress and the firm would benefit from better machinery. Sloman (2001:96) notes that large machines may be more efficient in the sense that more output can be gained for a given amount of inputs. For instance, no matter the size of a machine is, normally it can be operated by a single worker. Therefore a small-scale business could not make full use of one. This introduces the concept of "indivisibilities". It's less likely to occur when the ratio of output is continuously increasing. However, the average cost of the machine will fall as the level of usage goes up. What's more, Maunder (1992:327) clarifies the close connection between the principle of increased dimensions by stating that in the size of a globe enlarge more than commensurately within its length of the closed curve. In a word, the costs were in slow growth while the capacity has grown several times.
Another type of internal economies of scale is the managerial