Economies of Scale Quiz

What is an internal economy of scale?

• A reduction in average costs due to increased production capacity

• An increase in average costs due to decreased production capacity

• A reduction in sales due to increased production capacity

• An increase in sales due to decreased production capacity

How does an internal economy of scale affect a firm's pricing strategy?

• It allows the firm to charge higher prices

• It forces the firm to charge higher prices

• It allows the firm to charge lower prices

• It forces the firm to charge lower prices

According to the diagram, what happens to unit costs as output rises above Q3?

• Unit costs decrease

• Unit costs remain constant

• Unit costs increase

• Unit costs fluctuate randomly

How do purchasing economies help reduce costs for large businesses?

• By increasing the number of suppliers

• By buying in bulk and receiving discounts

• By reducing the number of employees

• By increasing advertising costs

What is an effect of internal diseconomies of scale?

• Decrease in average costs

• Increase in average costs

• Increase in borrowing capacity

• Decrease in production output

What does the lowest point on the LRAC curve represent?

• Maximum inefficiency

• Output of productive efficiency

• Point of diseconomies of scale

• Highest average cost

Which of the following is an internal diseconomy of scale mentioned in the material?

• Increased motivation

• Effective communication

• Reduced motivation

• Enhanced productivity

What is an example of an external economy of scale?

• University Research Departments helping to fund research

• Increasing internal production efficiency

• Reducing employee wages

• Decreasing product quality

What does evaluating the implications of growth involve?

• Assessing the business objective of growth

• Considering economies and diseconomies of scale

• Ignoring marketing and purchasing factors

• Focusing solely on staff motivation

What is organic growth in the context of business organizations?

• Growth through mergers and acquisitions

• Growth through internal expansion

• Growth through reducing competition

• Growth through diversification