Economies And Diseconomies Of Scale
Questions and Answers
- 1.
Economics of scale can be defined as
- A.
The cost of production
- B.
The price paid to other businesses for raw materials
- C.
The money lost as a business increases the levels of production
- D.
The money saved as a business increases their production
Correct Answer
D. The money saved as a business increases their productionExplanation
Economies of scale refers to the cost advantage that a business can achieve when it increases its production levels. As the business produces more units, it can spread its fixed costs (such as rent, machinery, and administrative expenses) over a larger number of units, resulting in lower average costs per unit. This allows the business to save money and increase its profitability. Therefore, the correct answer is "The money saved as a business increases their production."Rate this question:
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- 2.
All of the following are internal economies of scale EXCEPT
- A.
Managerial
- B.
Productivity
- C.
Financial
- D.
Technical
Correct Answer
B. ProductivityExplanation
Internal economies of scale refer to the cost advantages and efficiency gains that a company can achieve as it increases its scale of production. Managerial economies of scale occur when larger firms can afford to hire specialized managers and benefit from their expertise. Financial economies of scale refer to the cost advantages that come from larger firms having better access to financing and being able to negotiate better terms with suppliers. Technical economies of scale occur when larger firms can invest in more advanced technology and benefit from lower costs per unit. Productivity, on the other hand, is not typically considered an internal economy of scale, as it refers to the efficiency and output per unit of input, rather than the cost advantages of scale.Rate this question:
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- 3.
How many external economies of scale are there
- A.
1
- B.
2
- C.
3
- D.
4
Correct Answer
D. 4Explanation
There are four external economies of scale. External economies of scale refer to the benefits that a firm or industry gains from the growth and development of the overall market or industry. These benefits can include increased availability of skilled labor, improved infrastructure, access to specialized suppliers, and knowledge spillovers. As the market or industry expands, these external factors can lead to cost savings and increased efficiency for individual firms.Rate this question:
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- 4.
R&D stands for
- A.
Ride and die
- B.
Research and Development
- C.
Reap and dump
- D.
Research and developing
Correct Answer
B. Research and DevelopmentExplanation
R&D stands for Research and Development. This term refers to the activities that a company or organization undertakes to innovate, improve, and create new products, technologies, or processes. It involves conducting research, experimenting, and testing ideas to bring about advancements and improvements in various fields. R&D plays a crucial role in driving innovation, competitiveness, and growth in industries.Rate this question:
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- 5.
The use of waste materials means;
- A.
What can be made from these waste materials
- B.
How they are disposed
- C.
How much money you can make from them
- D.
How they can be reused by another business to make money
Correct Answer
D. How they can be reused by another business to make moneyExplanation
The correct answer is "How they can be reused by another business to make money." This answer suggests that waste materials can be repurposed and sold to other businesses as a way to generate profit. It implies that waste materials have value and can be utilized in a way that benefits both the environment and the economy.Rate this question:
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- 6.
Diseconomies of scale is known as
- A.
How badly a business fails
- B.
The amount of money lost when a business increases production
- C.
The amount of money lost when a business decreases production
- D.
How much money is gained when production increases
Correct Answer
B. The amount of money lost when a business increases productionExplanation
Diseconomies of scale refers to the situation where a business experiences an increase in costs per unit of output as it increases production. This means that as the business expands and produces more, its cost per unit of output rises, leading to a loss of money. This can happen due to various factors such as inefficiencies, coordination issues, and increased complexity in managing larger operations. Therefore, the correct answer is "The amount of money lost when a business increases production."Rate this question:
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- 7.
Which of the following is an internal diseconomies of scale
- A.
Technical
- B.
Supervisors
- C.
Managerial
- D.
Welfare
Correct Answer
A. Technical -
- 8.
Which of the following is an external diseconomies of scale
- A.
Cost of raw materials
- B.
Agglomeration
- C.
External Capacity
- D.
Improved infrastructure
Correct Answer
C. External CapacityExplanation
External diseconomies of scale refer to the increase in costs that a firm experiences as a result of the growth and expansion of the industry as a whole. External capacity is a factor that can lead to external diseconomies of scale. When the industry grows and expands, it may lead to increased competition for resources such as labor, raw materials, and infrastructure. This increased competition can drive up costs for firms, resulting in external diseconomies of scale. Therefore, external capacity is the correct answer as it directly relates to the concept of external diseconomies of scale.Rate this question:
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- 9.
Logistics Cost means
- A.
The cost of raw materials increases
- B.
The cost of transportation increases
- C.
The cost of raw materials decreases
- D.
The cost of transportation decreases
Correct Answer
B. The cost of transportation increasesExplanation
Logistics cost refers to the expenses incurred in the process of transporting goods from one location to another. This includes various factors such as fuel costs, maintenance of vehicles, labor costs, and any other expenses related to transportation. Therefore, if the cost of transportation increases, it will directly impact the logistics cost as a whole. Higher transportation costs can be due to factors such as rising fuel prices, increased demand for transportation services, or additional fees and charges imposed by carriers.Rate this question:
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- 10.
Internal economies / diseconomies of scale are
- A.
Things that a business can control
- B.
Things that a business can sometimes control
- C.
Things that a business cannot control
- D.
Things that a business can never control
Correct Answer
A. Things that a business can controlExplanation
Internal economies/diseconomies of scale refer to the factors that a business can control. These factors include the size of production, technological advancements, specialization, and efficient use of resources. By managing these aspects, a business can achieve cost savings, increased productivity, and improved efficiency, leading to economies of scale. On the other hand, if a business fails to effectively control these factors, it may experience diseconomies of scale, resulting in increased costs and decreased efficiency. Therefore, the correct answer is "Things that a business can control."Rate this question:
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