Economics Quiz on Economies of Scale

What happens to the average cost per unit when a business increases its production in the long run?

• It increases

• It decreases

• It stays the same

• It fluctuates

In the short run, what causes costs to fall due to division of labour and specialisation?

• Increased competition

• Improved technology

• Workers doing different jobs and getting better at them

• Higher wages

What is a characteristic of technical economies?

• Buying more materials in bulk

• Using modern technology to work more efficiently

• Spreading advertising costs over many products

• Receiving loans with lower interest rates

How do financial economies benefit big companies?

• By allowing them to buy more materials

• By enabling them to use better machines

• By giving them loans with lower interest rates

• By reducing marketing costs

What is an example of marketing economies?

• Using computers to control stock

• Dividing work among more workers

• Buying materials in bulk

• Spreading advertising costs over many products

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

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

Why is the economies of scale graph considered a long-run average cost (LRAC) curve?

• Because output remains constant in the long run

• Because fixed costs increase as production increases

• Because in the long run, all costs are variable and there are no fixed costs

• Because the firm uses less labour in the long run

What is the main difference between short-run and long-run costs in economics?

• In the short run, firms can change all resources

• In the short run, some costs are fixed; in the long run, all costs are variable

• In the long run, firms cannot change fixed costs

• There is no difference between short-run and long-run costs