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Production Cost

In: Business and Management

Submitted By allynanelia
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a) Explain why, according to economic analysis, there are benefits from large scale production.
Large scale productions are usually by large firms as they have the resources to do so. Benefits from large scale production means that the company would earn more profits through a higher output. This can be attained from earning more revenue and incurring lesser cost during production.
When the firm generates more revenue from large scale production, it will have the funds to invest in research and development. This will allow them to improve the quality of their services and facilities. For example, airline companies would be able to install better televisions and more comfortable seats for their passengers. They can also provide more channels and entertainment and the increased in variety will cater to different tastes and preferences. More passengers will thus be attracted to taking these flights overseas due to the attractive new features the airline companies provide in their airplanes. This will allow the company to earn more revenue and profits.
In addition, with more revenue earned from a greater output, the firm will have funds to advertise and this gives them a benefit over smaller firms that do not have the means to do so. With more advertising and promotion of their airlines, passengers will be more aware of the services these airlines provide. For example, Singapore Airlines constantly has advertisements on television on their quality service and this encourages passengers to choose their airlines over the rest hence given them a larger market size to earn more profits.
With large scale production, it means that these firms are large and they enjoy large market size and market share. Therefore the demand for their goods and services will be high. For example, Air France does not cater to only locals but overseas passengers as well. More revenue and…...

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