Chapter 6 Economies of Scale U3

Chapter 6 Economies of Scale U3

by EconSuperstar's Channel

Multiple Choice

The law of diminishing marginal returns is not relevant to the long run because

• the quantity of labour is variable in the long run

• in the long run, no factor inputs are fixed

• in the long run, no factor inputs are variable

• the law of diminishing marginal returns applies in the long run

Multiple Choice

Where long-run average total cost stays the same as the quantity of output changes.

• Constant Returns to Scale

• Economies of Scale

• Efficient Scale

• Diseconomies of Scale

Multiple Choice

Where long-run average total cost rises as the quantity of output increases.

• Economies of Scale

• Effecient Scale

• Constant Returns to Scale

• Diseconomies of Scale

Multiple Choice

Economies of scale can only be achieved in....

• Long Run

• Short run

Multiple Choice

With economies of scale, which type of cost do we use to determine the efficiency of a business?

• fixed cost

• variable cost

• average cost

• total cost

Multiple Choice

Which of the following refers to the size and volume of a business or company's produce or output?

• economies of scale

• scale of operation

• diseconomies of scale

• scale of production

Multiple Choice

Which of the following is most likely to be an input that can be adjusted in the long run, but not in the short run?

• industrial sized oven that is used to bake bagels

• natural gas to power the ovens

• the yeast, an ingredient, used in the dough

• the workers in the bakery

Multiple Choice

Based on the diagram the downward sloping portion of the curve represents ____

• Economy of scale - the average cost rises proportionately less to output.

• Constant economy of scale - average cost rises proportionately to output

• Diseconomy of scale - average cost rises proportionately faster than output

Multiple Choice

Based on the diagram the upward sloping portion of the curve represents ____

• Economy of scale - the average cost rises proportionately less to output.

• Constant economy of scale - average cost rises proportionately to output

• Diseconomy of scale - average cost rises proportionately faster than output

Multiple Choice

Internal economies of scale occurs when.......

• LRMC falls as output rises

• LRAC falls as output falls

• LRAC falls as there is a growth in the entire industry

• LRAC falls as output rises

• LRAC rises as output rises

Multiple Select

External economies of scale is where LRAC falls when.......

• the firm grows

• the economy grows

• the economy contracts

• the industry grows

• the firm declines

Multiple Choice

Large firms can afford to advertise and sell in larger quantities to develop brand loyalty. This is an example of

• Purchasing economies of scale

• Technical economies of scale

• Managerial economies of scale

• Marketing economies of scale

• Risk bearing economies of scale

Multiple Select

Which of the following EOS refers to improving the production process?

• Financial

• Managerial

• Technical

• Purchasing

Multiple Choice

Large firms can negotiate better interest rates on loans; this reduces the costs of borrowing for larger companies. This is an example of

• Financial economies of scale

• Technical economies of scale

• Managerial economies of scale

• Marketing economies of scale

• Risk bearing economies of scale

Multiple Choice

The use of artificial intelligence and robotics in factories is an example of what Internal Economies of Scale?

• Managerial Economy

• Technical Economy

• Financial Economy

• Commercial Economy

Multiple Choice

Larger firms are better able to diversify into a range of product areas or markets and thus lessen their risk. This is an example of

• Financial economies of scale

• Technical economies of scale

• Managerial economies of scale

• Marketing economies of scale

• Risk bearing economies of scale

Multiple Choice

Employing a specialist cost accountant in a growing business is an example of which type of economy?

• Technical economy

• risk-bearing economy

• Managerial economy

• Marketing economy

Multiple Choice

This type of internal economies of scale occurs when a large factory for example can make better or more efficient use of specialist machinery compared to a small firm

• Economies of Concentration

• Economies of Information

• Technical Economies of Scale

• Managerial Economies of Scale

Multiple Choice

Machinery is likely to be efficient. what economies it indicate?

• Financial Economies

• Buying Economies

• Technical Economies

• Managerial Economies

Multiple Choice

??

• Internal Economies

• External Economies

Multiple Select

Which factors are reasons for the occurrence of economies of scale?

• Specialisation of labour and management

• Indivisibilities of capital equipment and efficient processes

• Co-ordination and monitoring difficulties

• Poor worker motivation

Multiple Choice

Which of the following is an example of an external economy of scale?

• Increased cooperation and information sharing between businesses

• Rising costs of inputs

• Lower costs owing to bulk buying

• Better efficiency resulting from the specialization of labor

Multiple Choice

External economies of scale can arise from

• Purchase and use of physical/human capital by a particular business/firm

• Greater availability of skilled laborers for a particular industry in a particular area

• A business/firm being able to obtain lower interest rates on loans

Multiple Choice

"South Korea’s population has fallen for the first time in the country’s history, as it battles an aging population and chronically low birth rate.

The latest census figures, released at the weekend, show the population stood at 51,829,023 at the end of December, down from 20,838 from the previous year."

What external economies of scale is the statement concerned especially for businesses in South Korea?

• Specialists and local back up firms needed.

• The area where businesses are located

• availability of good transportation

• availability of local skilled labor

Multiple Choice

Internal diseconomies of scale can be caused by

• Being unable to purchase stocks at a discounted price

• Poor management being unable to effectively control a large workforce

• Traffic congestion causing delays to delivery of important stocks

• Advertising costs to a global audience

Multiple Select

Which factors are reasons for the occurrence of diseconomies of scale?

• Communication difficulties

• Efficiency of capital equipment

• Co-ordination and monitoring difficulties

• Poor worker motivation

Multiple Choice

A firm is growing either organically or through mergers. In the long run, the firm should stop expanding when it has reached its _______________. This is the point where long run average costs are their lowest. 

• envelope.

• profit-maximizing scale of production.

• minimum efficient scale.

• shut down point.

Multiple Choice

Which levels of output are produced at the minimum possible cost per unit?

• q₁

• q₂

• q₃

• All of the above.

Multiple Choice

The output range in region "c" is associated with......

• Economies of Scale

• Internal economies of Scale

• Internal diseconomies of Scale

• Diseconomies of Scale

Multiple Choice

• The new airline can negotiate discounts when buying fuel.

• The new airline has many layers of management.

• The new airline is unable to hire enough pilots.

• The workforce of the new airline lacks morale and is demotivated.

Multiple Choice

The diagram is for a farmer who produces with two inputs, land and labour. In this diagram what does the SRATC represent?

• The possible increases in farm land over time

• The lowest possible average cost that can be attained by a firm for any level of output

• The point at which a firm achieves minimum efficient scale

Multiple Choice

Which farm sizes should the farmer select?

• SRAC4 - as at this point the firm has its lowest long run total average costs

• SRAC9 - as the firm is producing the most amount of output

• SRAC3 - as this is when the firm is still experiencing increasing returns to scale

Multiple Choice

The figure shown here illustrates the short-run average cost (SRATC) curves for a firm.

Which of the following best describes what SRATS curves shown here collectively illustrate?

• a firm's total cost of producing at different scales of production

• a firm's hypothetical short-run cost curves for different levels of fixed cost

• a firm with diminishing returns to input

• firm with average fixed costs that decline as output increases

Multiple Choice

• When each of the three SRAC curves is U-shaped it shows the existence of economies of scale.

• When the LRAC curve is upward-sloping beyond output OQ it shows the existence of diseconomies of scale.

• When the minimum point of SRAC2 is below that of SRAC1 it shows the existence of the law of variable proportions.

• When the minimum point of SRAC2 is below that of SRAC3 it shows the existence of economies of scale.

Multiple Choice

What happens to the LRAC curve when there are external economies of scale?

• LRAC curve shifts upward

• Movement along the LRAC curve

• LRAC curve shifts downward