A topic that shows an understanding of economics conept Term Paper

A topic that shows an understanding of economics conept - Term Paper Example Wal-Mart gets a huge discount for buying the milk in large quantities. Similarly, the suppliers who deliver the ten thousand cartons enjoy the economies of scale. The cost of delivering many cartons is remarkably low. Notably, the average cost of delivering the thousand cartons is less than that of transporting hundred. In effect, the transport cost per unit reduces remarkably. The supplier will need to pay a single driver, and the fuel cost will remain fixed. It is evident that the economies of scale benefit the firms that purchase products in large quantities. The reduction of the cost per output in turn increases the profitability of firms as in the case of Wal-Mart. The Wal-Mart economies of scale is internal. It is specific to the individual enterprise. Boyes and Melvin (2012) contend that the firms that buy products in bulk for resale benefit from the internal economies of scale known as purchasing. Such firms reduce the expenses including the transport costs. Wal-Mart continues to gain the purchasing economies of scale for buying products from the suppliers in large quantities. Similarly, the supermarket chain achieves purchasing discount. In essence, Wal-Mart and suppliers benefit from the economies of scale by purchasing and delivering in bulk respectively. Therefore, firms should capitalize on the economies of scale to maximize profits and reduce the cost of production as exemplified by Wal-Mart. The economies of scale enjoyed by the Wal-Mart can be used expound the patterns of global trade. In effect, the exploitation of the economies of scale can explain the growth of firms such as Wal-Mart in a particular industry. Boyes and Melvin (2012) argue that economists utilize the economies of scale justify free trade policies. Perhaps, the economies of scale, which Wal-Mart enjoys, has facilitated the expansion of the chain supermarket to many parts across the globe. The low cost of