Economies and Diseconomies of Scale

Internal economies of scale are those that

• Result from changes in production techniques

• Generate lower per unit production costs

• Reduce production costs in the short run

• Increase due to the growth of the industry as a whole

If a firm doubles its use of inputs and finds that output increases by 50%, then it has experienced

• Diseconomies of scale

• Economies of scale

• Evolution

• Growth

___________________  resulting from a firm growing too large

•  external diseconomies

•  internal economies

•  internal diseconomies

•  external economies

Machinery is likely to be efficient, what economies it indicates?

• Financial economies

• Technical economies

• Buying economies

• Managerial economies

Fill in the blank.

Economies of scale is when as output _________, unit costs ______  in the long run.

• Increases; decrease

• Decreases; increase

• Increases; increase

• Decreases; decrease

Internal diseconomies of scale can be caused by

• Advertising costs to a global audience

• Being unable to purchase stocks at a discounted price

• Traffic congestion causing delays to delivery of important stocks

• Management control being weakened with a larger workforce

Large firms can afford to advertise and sell in larger quantities to develop brand loyalty.  This is an example of

• Purchasing economies of scale

• Marketing economies of scale

• Managerial economies of scale

• Risk bearing economies of scale

Large firms can negotiate better interest rates on loans; this reduces the costs of borrowing for larger companies. This is an example of

• Technical economies of scale

• Marketing economies of scale

• Risk bearing economies of scale

• Financial economies of scale

Which of the following is not a cause of internal diseconomies of scale?

• Lack of staff morale and motivation

• Late deliveries due to congestion in busy locations

• Poor communication between different departments

• Less control, direction and coordination of human resources

Larger firms can hire specialists (e.g. managers, accountants) and are therefore able to increase productivity. This is an example of

• managerial economies of scale

• marketing economies of scale

• risk bearing economies of scale

• technical economies of scale