Readers Question: Why government, rather than private industry, is required for an effective mosquito eradication program? An effective mosquito eradication program is an example of a public good. If you exterminate all the mosquitos it has the characteristics of Non rivalry. – When you benefit from living in an area free of mosquito’s it doesn’t …
Note Economies of Scale occurs upto Q2. After Q2 dis-economies of scale starts to occur
Basically as a firm expands it receives increasing returns to scale. To understand why economies of scale occur it is useful to think about large companies and how they benefit from their size.
To cannibalise your assets means that you create a new product which eat into sales of your old products. For example, suppose Microsoft have good sales for its X Box. If it introduced a new superior product, like the ‘X box mark 2’. Nobody would want to buy the old X Box. Therefore, sales of …