IB Business Management - 1.5.1 Economies of Scale Quiz

Which of the following is an example of a technical economy of scale?

• Bulk buying of raw materials

• Specialized machinery reducing per-unit production costs

• Improved marketing strategies

• Increased borrowing capacity

How does managerial economies of scale reduce costs for a large firm?

• By allowing better advertising rates

• By reducing the need for skilled labor

• By employing specialized managers to increase efficiency

• By outsourcing all non-core activities

Purchasing economies of scale occur when:

• A firm increases the number of products produced.

• A firm negotiates lower prices for bulk buying of materials.

• A firm invests in inexpensive, high-tech machinery.

• A firm raises funds from a larger group of shareholders.

Which of the following best describes financial economies of scale?

• Larger firms can secure loans at lower interest rates due to perceived lower risk.

• Larger firms sell products at higher prices.

• Smaller firms have better access to financial resources.

• Larger firms increase their product prices to secure financing.

Which of the following is an example of risk-bearing economies of scale?

• A large firm diversifying into different markets to spread risk.

• A firm producing a wider variety of products.

• A small business buying raw materials in bulk.

• A business reducing the price of its products to increase demand.

A large manufacturing firm benefiting from the ability to spread advertising costs over a greater number of units is an example of:

• Marketing economies of scale

• Financial economies of scale

• Purchasing economies of scale

• Risk-bearing economies of scale

External economies of scale occur when:

• Firms in an industry benefit from lower production costs due to industry-wide factors.

• Firms reduce costs by internal efficiencies.

• Individual firms lower costs by increasing production.

• Firms collaborate with competitors.

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

• A firm increasing its output

• Government investment in local infrastructure, benefiting all businesses in the area

• A firm buying raw materials at discounted prices

• Outsourcing production to cheaper suppliers

Which of the following could lead to external economies of scale for an industry?

• Improved education and training facilities in the region

• Hiring more skilled managers

• Bulk purchasing raw materials

• Investing in more efficient machinery

External economies of scale are likely to benefit firms located in:

• Isolated rural areas

• Competitive industries with many small firms

• Industrial clusters where firms share resources and knowledge

• Markets with high barriers to entry