Long Run Costs and Economies of Scale (Online Lesson)

In this online lesson, we develop long run cost curves by focusing on economies and diseconomies of scale, both internal and external.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

• a review of short run costs
• the envelope curve - moving from the short run to the long run
• causes of internal economies and diseconomies of scale
• external economies of scale
• key evaluation points for economies of scale

Additional teacher guidance is available at the end of this lesson. Thank you to Nicky King and Jon Clark for their contributions to this lesson.

HOW TO USE THIS ONLINE LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and application of free trade and comparative advantage. Others are based on short videos, including activities for you to think about and try at home, as well as some extra worksheet-based activities.

If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.

ACTIVITY 1: VIDEO - REVIEWING SHORT RUN COSTS

Before studying long run costs, it is important to review the topic of short run costs, because it is an important "building block" for understanding long run costs.

ACTIVITY 2: GAME - SHORT RUN COSTS CALCULATION QUIZ

Make sure that you are on top of your game with short run costs by testing yourself in this interactive game.

ACTIVITY 3: VIDEO - MOVING FROM THE SHORT RUN TO THE LONG RUN

Explore how economists extend the theory of short run costs into the long run. In this video, we cover the "envelope curve" and introduce key terms relating to long run costs and economies of scale.

ACTIVITY 4: WIDER RESEARCH AND CONTEXTUAL KNOWLEDGE

Follow these links to some great examples of firms benefiting from internal economies of scale:

• the Heinz baked bean factory in Wigan
• how BMW cars are made

Next, carry out your own research to find real-world examples of firms benefiting from internal economies of scale - can you find another 3 to share with your class and teacher?

ACTIVITY 5: VIDEO - REASONS FOR ECONOMIES AND DISECONOMIES OF SCALE

In this video, we delve deeper into the theory of economies of scale, exploring some of the reasons why they exist and apply it to two different industries. We also consider why some firms may start to struggle with diseconomies of scale

ACTIVITY 6: GAME - MCQ QUIZ

Test your knowledge of the content covered so far in this online lesson in this interactive MCQ quiz!

ACTIVITY 7: VIDEO - EXTERNAL ECONOMIES OF SCALE

In this video, we look at some of the reasons why firms in certain industries may benefit from external economies (and diseconomies!) of scale.

ACTIVITY 8: GAME - FILE AWAY ACTIVITY

Try this categorising activity, testing your knowledge of internal and external economies and diseconomies of scale.

ACTIVITY 9: WIDER RESEARCH AND CONTEXTUAL KNOWLEDGE

There are numerous examples of external economies of scale in the real-world, including motorsport in the Oxfordshire area of England, and places such as Silicon Valley in the US and Silicon Roundabout in London which focus on tech firms. Carry out your own research to find out more about these examples or others of your own choice. Produce your findings in a creative way e.g. poster, short movie, podcast etc.

ACTIVITY 10: VIDEO - EVALUATING ECONOMIES OF SCALE

In this short video, we consider some evaluation points in relation to the topic of long run costs, and compare economies of scope with economies of scale.

ACTIVITY 11: MCQ TEST

See how well you've understood the topic of "costs" in this MCQ quiz.

ACTIVITY 12: SYNOPTIC ACTIVITY

Have a go at this synoptic thinking assessment mat which considers economies of scale in the fighter jet industry. You can check your own answers, and then ask your teacher if you need more help.

ADDITIONAL TEACHER GUIDANCE

This lesson comprises:

• around 45 minutes of guided video content, spread across 5 videos
• around 20-25 minutes of student thinking and activity time across those videos
• 4 interactive games / MCQ quizzes to test knowledge and understanding
• a synoptic activity