Larger businesses tend to benefit more due to several factors related to economies of scale; this means that the company can benefit from lower long-term average costs – but small businesses cannot achieve such benefits. For example, purchasing advantages whereby large companies can purchase raw materials in bulk as they produce on a larger scale can thus benefit from discounts and therefore reduce production costs. Or they may experience technical economies in which investment in more advanced machinery or larger premises will allow firms to benefit from increasing returns to scale where output is greater than input, thereby improving productivity. Productive efficiency through division of labor and specialization, which will lead to lower costs. Economies of scale can be illustrated in Diagram 1, where as production increases (Q to Q1), costs decrease (C to C1). The minimum efficiency scale is illustrated by the constant part of the LRAC. Labeled quality assurance companies operate at the optimal point and experience constant long-term average costs where economies of scale are exhausted; the company therefore operates with long-term productive efficiency. This is the reason why large companies are considered better than small ones. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay However, as the LRAC curve increases; large firms will experience diseconomies of scale. For example, as a company grows, control becomes more difficult, tracking the productivity of each worker in a large company will become more difficult, which could lead to a loss of productive efficiency and therefore an increase in average costs . Furthermore, combined with poor communication and coordination due to the increasing size of companies, the increase in average costs is accelerating. Additionally, because large companies are often joint stock companies, ownership and control are often distributed among a group of shareholders, so that control of the company is not subject to a single person but rather is directed by several directors who represent the interests of the shareholders. This makes running large businesses more difficult, as negotiations and meetings are required to carry out various operations, thereby reducing the efficiency of the business, whereas small businesses are usually owned by a single person, so that management and decisions can be made quickly. Additionally, communication and coordination in small businesses are much easier to manage and less costly due to the smaller number of production factors. In this sense, it can be said that small companies work more efficiently than large companies..