Week 19 summary sheet questions

What are internal economies of scale?

• The rising average costs when a firm gets too big.

• Benefits all firms in an industry receive as the industry grows.

• Cost benefits that an individual firm can enjoy when it expands.

• The disadvantages that come with a firm's expansion.

Which type of economy of scale is associated with large firms getting cheaper rates when buying resources in bulk?

• Marketing economies

• Technical economies

• Purchasing economies

• Managerial economies

What is a benefit of external economies of scale?

• Individual firms can negotiate better interest rates on loans.

• All firms in an industry benefit from falling average costs as the industry grows.

• Larger firms can afford more expensive advertising campaigns.

• Firms can rely more on bureaucracy for efficient management.

What can lead to diseconomies of scale?

• A build-up of skilled labor in a particular region.

• Improved infrastructure due to industry dominance in a region.

• Inefficiencies arising from overly complex bureaucracy and long chains of command.

• Cooperation between firms in the same industry to share research and development costs.

What is likely to happen when a business produces more than its ideal size, for example, 70,000 units?

• It will experience internal economies of scale.

• Its average costs will begin to rise due to inefficiency.

• It will benefit from skilled labor concentration in the region.

• It will be able to afford specialist managers and reduce costs.

What is a barrier to business growth that involves the difficulty of managing a large number of staff and processes?

• Lack of finance

• Nature of the market

• Control and coordination

• Lack of managerial skills

Which of the following is NOT listed as an advantage of job production?

• Products can be bespoke/custom-made.

• Production is easy to organise.

• Quality is likely to be high.

• Workers are likely to be motivated as job is varied.

What is the term used when a business owner does not want to grow their business and is satisfied with making enough money to meet their needs?

• Economies of scale

• Diseconomies of scale

• Profit maximizing

• Profit satisficing

What is a disadvantage of batch production?

• High quality of products

• Motivated workers due to varied jobs

• Production to exact specifications

• Production may be slow with long lead times

What is flow production?

• A process where each worker completes a single task in the production of a product.

• A system where a business produces a number of the same products changing production to another product with different specifications.

• A method where products are customized for each individual customer.

• A strategy where products are made one at a time in a sequence of steps.