Economies and Diseconomies of Scale Essay Example

Economies and Diseconomies of Scale Essay Example Economies and Diseconomies of Scale Paper Economies and Diseconomies of Scale Paper Case Study 3: Economies and Diseconomies of Scale Name: Course: Date: Case Study 3: Economies and Diseconomies of Scale Question 1 Considering McDonalds size, economies of scale can come from discounts as well as its ability to produce more at a reduced price out of its equipments. Therefore, with a uniform menu, it means that McDonald will be buying the ingredients in large amounts, hence at a cheaper price. Additionally, a uniform menu means that McDonalds will be focusing on the size of output for few products, making production cheaper. Their big kitchens allow for larger equipments and specialized labor, which at higher output would produce at a lower cost per unit than a smaller kitchen without many specialized equipments would (McEachern 2011). Expanding into other countries makes menu planning due to different laws and cultures (McEachern 2011). For instance, it becomes difficult to plan for a menu in India where beef is illegal because cows are worshiped. Thus, the company would have to look for an alternative to beef burgers. In this case, planning the menu is made harder by the cultural beliefs. This makes economies of scale harder to achieve. Question 2 Movie theaters not only show movies, they also sell movies at the concession stand. Therefore, the theater has to have three people, one selling the movies at the concession, another one selling tickets at the entrance while the other one operates the projector. However, if another screen is added to the theater, the same employee can operate without needing an additional workforce (McEachern 2011). Therefore, it allows economies of scale to have multiple screens in a theater, which makes the workers more productive. Additionally, having multi screens will allow two movies to be viewed at the same time, ensuring to sell the greatest number of tickets within a short span of time, as opposed to showing each at one time. On the other hand, the benefits of locating multiscreen theaters at shopping malls it the reduced cost that comes with customers using the same rest rooms, while the construction of another screen may be noticeable. At a shopping mall, the theater can have advertisements that are more noticeable while its costs can be spread over several films, as opposed to one film. This creates economies of scale due to locating several screens in one location (McEachern 2011). References McEachern, W.A. (2011). Economics: A Contemporary Introduction. New York, N.Y: Cengage Learning.