Economies of Scale Quiz

What is an economy of scale?

• A situation where increasing production reduces average costs

• A situation where increasing production increases costs

• A short-term cost-saving strategy

• A government policy to help businesses

What are internal economies of scale?

• Cost reductions due to industry-wide improvements

• Cost advantages from a firm's growth

• Cost disadvantages when a firm expands

• Government subsidies for firms

Which of the following is NOT an internal economy of scale?

• Bulk-buying of raw materials

• More efficient management

• Improved transportation infrastructure in the industry

• Use of advanced production technology

What is an example of technical economies of scale?

• Firms purchasing raw materials in bulk

• Investing in automation and machinery

• Spreading marketing costs across more products

• Hiring specialized managers

How do managerial economies of scale reduce costs?

• By increasing the number of workers

• By reducing the amount of capital investment

• By allowing businesses to hire specialized managers

• By cutting wages across the firm

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

• A government lowering corporate tax rates

• A firm negotiating lower rent

• A well-developed supplier network reducing costs for all firms in the industry

• A company increasing wages for its employees

What type of economy of scale is achieved when a firm gets cheaper loans due to its size?

• Financial economies

• Managerial economies

• Technical economies

• Bulk-buying economies

Why do external economies of scale benefit all firms in an industry?

• They depend on an individual firm's size

• They result from improvements in the overall business environment

• They lead to an increase in average costs

• They only benefit the largest firms

Which of the following is NOT an external economy of scale?

• Universities providing skilled workers for an industry

• Improved transport networks reducing delivery costs

• A firm negotiating lower prices for its raw materials

• Government-funded research and development for an entire industry

What is a diseconomy of scale?

• A situation where increasing production increases average costs

• A situation where firms become more efficient

• A short-term rise in costs before decreasing again

• A financial issue faced only by small businesses