1.5 Economies of Scale

'economies' is closely linked to which word for this topic?

• lower quality

• higher quality

• cost savings

• higher costs

'scale' most likely refers to...

• a weight measuring device

• size

• lizard skin

• flaky crust

Identify the "inputs" seen when the bread was being made

• Bread

• Baker

• Baking Tools

• Oven

Answer explanation

Bread was the output. All other items were inputs, or factors of production.

If inputs double, what outcome shows the benefit of economies of scale

• outputs double

• outputs more than double

• outputs less than double

• outputs stay the same

An increase in production will increase business costs

• True

• False

All of the below answers are reasons why businesses can achieve economies of scale and reduce average costs, except one. which one is NOT a reason?

• efficiency of really expensive equipment

• ability to purchase inputs at quantity discounts

• Specialization (division of labour) having employees focused on specific tasks

• Bureaucracy. As organisations become larger, there is more paperwork to complete

Does filming and producing 3 movies cost more or less than filming and producing 1 movie?

• Less

• More

• The same

So, if it costs more to make 3 movies than 1 movie, explain why it can be 'cheaper' to make 3 movies than 1 movie. Points awarded for your explanation.

What is it called when average costs rise as production levels increase?

• Uneconomies of scale

• poor economies of scale

• non-economies of scale

• Diseconomies of scale

Choose the correct definition for economies of scale

• As production levels increase, costs of production decrease

• As production levels increase, average costs of production increase

• As production levels decrease, average costs of production decrease

• As production levels increase, average costs of production decrease