How can the economies and diseconomies of the scale explain the size & # of real world firms in an industry?

Question

How can the economies and diseconomies of the scale explain the size & # of real world firms in an industry?

Answer 1

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Answer 2

well ecomonies of scale is when a company benefits from expanding and the cost of production per unit is lowered but the total units produced is more.... disecomonies of scale is the opposite when a company expands but doesn't make a profit from it... so therefore i'm thinking thats if the company benefits form economies of scale the company will tend to grow however if its experiencing disecomonies of scale it will have to cut down and my result in bankruptcy...

its only my views... not sure if its right...

Answer 3

If a large volume of output is required to attain the lowest costs of production, then any given firm must command a large portion of the market shares.  If the market is sliced thinly among many firms, then no one firm would be able to get that large volume of ouput and exhaust the benefits of economies of scale.  Sometimes a product or service needs to be done "in a big way" to be done cheaply--like car production.  How can you justify building a facility and putting out only a couple thousand units a year.  Won't work.