Asked by Isabella Huynh on May 09, 2024
Verified
Describe how an accounting firm could experience economies of scale.
Economies of Scale
The financial advantages achieved by companies through their operational size, with unit costs usually dropping as the scale of production increases.
- Understand the principles of economies and diseconomies of scale and their effects on cost structures.
Verified Answer
AK
Alexander KnightMay 12, 2024
Final Answer :
Specialization of labor can produce economies of scale. Specialization of labor could occur if the firm hires new workers with different areas of expertise. Suppose that the first person specializes in individual tax returns, the second person specializes in small business tax returns, and the third person specializes in farm tax returns. The three employees together could produce more than triple the number of tax returns that the first person could produce.
Learning Objectives
- Understand the principles of economies and diseconomies of scale and their effects on cost structures.