Why do some firms grow to become giants, while others remain small? In this issue of ECONOMIC REVIEW, I will be discussing a question that examines the key notions of diminishing returns to a factor and economies of scale. We will look at whether these two concepts are in conflict with each other, and at whether large firms are always more efficient than small ones.
Although this question was set by AQA, it addresses an issue that is included in the specifications for all of the exam boards in both the current and the new specifications.
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