Question

Distinguish economies and diseconomies of scale. How can the extent to which economies and diseconomies of scale explain the size and number of real world firms in an industry.

Answer 1

Economies of scale is a situation when the cost of production of good decrease as the firm goes on increasing the production and dis economies of scale is a situation when the cost of production increases as the firm goes on increasing the production of goods in the economy.

In the real world, all the large MNC and agglomerates benefit from the economies of scale in the market and the firms where the cost increases are the small firms. If they go on increasing the cost will also increase.