Understanding Internal Economies of Scale

What are internal economies of scale?

• Increases in average cost per unit of output as a result of increasing internal inefficiencies of a business.

• Reductions in average cost per unit of output as a result of increasing internal efficiencies of a business.

• Increases in average cost per unit of output due to external factors.

• Reductions in average cost per unit of output due to external factors.

Which of the following is an example of purchasing economies?

• Hiring more employees to increase production.

• Increasing the size of orders for raw materials to receive discounts.

• Investing in new technology to improve production methods.

• Expanding into new markets to increase sales.

How do purchasing economies reduce the average cost of production?

• By increasing the number of suppliers.

• By reducing the quality of raw materials.

• By receiving discounts on large orders, thus lowering the cost per component.

• By increasing the price of finished goods.

What is a key benefit of technical economies?

• Increased labour costs.

• Decreased efficiency and productivity.

• Increased efficiency and productivity, reducing average costs of output.

• Increased reliance on manual labour.

Why is technology considered more of a help than a hindrance in technical economies?

• It increases the number of employees needed.

• It decreases the quality of products.

• It increases efficiency and productivity.

• It increases the cost of production.

What is the main focus of financial economies?

• Reducing the number of financial transactions.

• Increasing the cost of borrowing.

• Reducing the cost of borrowing and improving financial management.

• Increasing the number of financial institutions.

How do financial economies benefit large businesses?

• By increasing the interest rates on loans.

• By providing access to cheaper finance options.

• By reducing the number of financial advisors.

• By increasing the cost of financial services.

Which of the following is NOT a type of internal economy of scale?

• Purchasing economies.

• Technical economies.

• Financial economies.

• Environmental economies.

What is the result of a business achieving internal economies of scale?

• Increased average cost per unit of output.

• Decreased average cost per unit of output.

• Increased reliance on external suppliers.

• Decreased market share.

Why are large orders valued by suppliers in purchasing economies?

• They lead to more profits for suppliers.

• They decrease the workload for suppliers.

• They reduce the need for quality control.

• They increase the number of suppliers.