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    Economies of scale

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    Which of the following industries do you think are likely to exhibit large economies of scale? Explain why in each case.

    a. Home Building
    b. Electric power generation
    c. Vegetable farming
    d. Software development
    e. Aircraft manufacturing

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    Solution Preview

    Economies of scale occur when long run average costs decrease as output increases.
    In industries where this is the case, there tend to be few large firms competing against each other, defined by an oligopoly market structure.
    In each of these industries listed, economies of scale could be present. Home building could have economies of scale in that a large ...

    Solution Summary

    Economies of scale are discussed in this posting. The long-run costs and output decisions are determined.