b) Economies of scale may be inappropriate, undesirable, or inaccessible for certain businesses because of many reasons. First of all, a business may be one that specializes in making products in a “niche markets” such as Ferrari in this case study. Making products for a “niche market” like Ferrari would usually not require “large scale production”. This therefore makes economies of scale inappropriate and undesirable for the needs of the business. At the same time, some business owners may want to have greater “control” over their businesses. This then make economies of scale undesirable because it would lead to less control and possible dilution of ownership. Moreover, some businesses may feel that economies of scale are inappropriate for them because they do not like the risk of diseconomies of scale and possible business failure. Last of all, economies of scale may be inaccessible for certain businesses because they simply lack the capital resources to take advantage of it. Since there are many factors like the need for new staff or new machinery associated with economies of scale.
c) Small businesses continue to thrive and survive without “economies of scale” for multiple reasons. To begin with, small businesses may sometime be businesses in a small niche market. A small niche market would usually be overlooked by larger firms that are after larger markets. This would prevent the “competition” for the business in general and allow it to have local monopoly power. By having local monopoly power, the business would be able to control the prices completely and would not need “economies of scale” to help it earn more profit. Second of all, small businesses can also receive government aids/subsidies. These just like economies of scale would help drive down the average production cost but without the costs involved with expanding a business to take advantage of economies of scale. Lastly, small businesses can thrive and survive without “economies of scale” because they have better “cost control” and less “financial risk”. These are advantages because larger firms that take advantage of “economies of scale” usually have less “cost control” and can encounter diseconomies of scale which could put them in financial risk.
d) Large businesses do not always operate in the best interest of the general public and they sometime operate against the interest of the public. There are a number of ways in which large businesses operate in the best interest of the public. The first way, a large business can operate in the best interest of the public would be it taking advantage of “economies of scale”. Economies of scale would allow a large firm to operate in the best interest of the public because it would decrease the average production cost for the firm. The decrease in production cost would allow the firm to give larger discounts for the public. On top of that, by taking advantage of “economies of scale” a larger firm can also become more competitive and protect its local market from foreign competitors. Thirdly, large businesses can also operate in the best interest of the general public because they have a lot of financial resources. A lot of financial resources are a benefit to the general public because it allows the large firms to conduct research and development to create new innovative products that can better serve the public. Furthermore, a large business can also take advantage of “economies of scope” which would allow it to provide more choices and products for the public.
On the other hand, there are also a number of ways in which large business operate against the best interest of the general public. One of the ways a large business operates against the best interest of the general public would be some large businesses holding a kind of “monopoly” over a market. A monopoly over a market is against the best interest of the public since it allows firms with a monopoly to fully control the prices in a market. This is bad because this would allow a firm to make as much of a profit as it wants without much opposition. On top of that, a large business may also use “economies of scale” to operate against the interest of the public. It can use “economies of scale” to operate against the interest of the public by using it to create “barriers to entry” and prevent competition. which again leads to higher prices for the public. Lastly, large businesses can also operate against the public by it caring more about the profits and the “efficiency” of production than the quality. This is against the best interest of the public because this could mean products that are of a lower quality.
All in all, large businesses pose both an advantage and a disadvantage to the general public.
