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Defining costs
Accounting profits versus economic profits |
Total
Cost Analysis 1
Start-up costs cause the curve to rise quickly at low levels of production. Examples include Incorporating, legal and accounting, Licenses and permits, Remodeling, Rent, Security Deposit or Real Estate Purchase, Signage and marketing materials, Initial inventory Supplies, Furniture and Equipment. Economies of scale make production very efficient causing the curve to flatten out over a considerable range of production. Examples include labor/management specialization, volume discounts, and use of by-product. Those wanting additional reading see Economies of scale - wiki Diseconomies of scale cause production to be inefficient and result in the curve rising sharply as maximum capacity is approached. Examples include Bureaucracy and diminishing returns. Japanese flexible production techniques enhance economies of scale and stretched out the low point on the AVC line. These techniques have been adopted by manufacturers around the world. see Diseconomy of scaleWikipedia, the free encyclopedia.
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