Economies of Scale Quiz

What is the definition of economies of scale?

• The reduction in average costs of production as a business increases its scale of production

• The fluctuating average costs of production as a business increases its scale of production

• The constant average costs of production as a business increases its scale of production

• The increase in average costs of production as a business increases its scale of production

In the long run, all costs become:

• Variable

• Marginal

• Sunk

• Fixed

What are the six types of internal economies of scale?

• Production, Distribution, Marketing, Financial, Human Resources, Research and Development

• Technical, Managerial, Financial, Commercial, Co-operation, Regulatory

• Marketing, Managerial, Risk-Bearing, Financial, Technical, Purchasing

• Labour, Supplier, Educational, Financial, Commercial, Co-operation

What are external economies of scale?

• Advantages that benefit a single business and not the industry

• Advantages that benefit the government and not the businesses

• Advantages that benefit a whole industry and not just an individual business

• Advantages that benefit the consumers and not the producers

What are examples of internal diseconomies of scale?

• Overcrowding, Increased price of resources, Traffic congestion, Financial services

• Communication, Commitment, Co-ordination, Complexity

• Labour, Supplier, Educational, Financial, Commercial, Co-operation

• Regulatory Costs, Waste, Office Politics, Risk Aversion

What causes higher costs per unit of output when the scale of an organization continues to increase?

• Economies of Scale

• Internal Diseconomies of Scale

• Marketing Economies

• External Diseconomies of Scale

Why do small firms continue to survive?

• They are not flexible in their operations

• They are unable to provide a personal service

• They have high set up costs

• They serve niche markets

What is the main problem that arises due to management problems in large organizations?

• Control is strengthened

• Co-ordination becomes easier

• Commitment and motivation of employees decrease

• Communication becomes more complex and harder to manage

What is the lowest average total cost output where productive efficiency is achieved called?

• LRAC

• SRAC 3

• SRAC 2

• SRAC

What are external diseconomies of scale caused by?

• Overcrowding in industrial areas

• Decreased demand for services

• Decreased demand for labor

• Decreased demand for resources