You overheard Mr. John, the newly hired marketing manager, saying: “I think our company should take advantage of economies of scale by increasing output, thereby spreading out our overhead fixed costs”. Would you agree with this statement? If not, provide a better description for the term “economies of scale”. Explain how they may be achieved by organizations. Highlight what would prevent them to occur.

Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
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Chapter21: Production And Costs
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Problem 16QP
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You overheard Mr. John, the newly hired marketing manager, saying: “I think our company should take advantage of economies of scale by increasing output, thereby spreading out our overhead fixed costs”.
Would you agree with this statement? If not, provide a better description for the term “economies of scale”. Explain how they may be achieved by organizations. Highlight what would prevent them to occur.

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