1.5 Growth and Evolution (IB BM)

Identify the term used to describe a reduction in average cost of production arising from a firm operating on a larger scale.

• Diseconomies of scope

• Economies of scale

• Economies of scope

• Diseconomies of scale

Identify the most appropriate description of internal economies of scale.

• Cost increases due to the firm’s own management

• Cost increases that effects the whole industry

• Cost savings due to factors within the firm’s control

• Cost savings available to the whole industry

Identify the example of an external economy of scale from the options below.

• Availability of specialist labour

• Specialisation and division of labour

• Marketing economies of scale

• Purchasing economies of scale

Identify the type of internal economy of scale as a result of a firm utilising highly efficient machinery and automation techniques to mass produce its output.

• Financial

• Purchasing

• Specialisation

• Technical

Identify the example of an internal economy of scale.

• Improvements in infrastructure

• Regional specialization and expertise

• Risk-bearing economies

• Technological advancements

Identify the term used to describe how firms can reduce their average costs per unit when a location possesses significant production support services and an abundance of highly skilled labour.

• Internal economy of scale

• Managerial economies

• Marketing economies

• Regional specialization

Identify the example of economies of scale from the options below.

• Output increased 20% and total costs increased 20%

• Output increased 30% and total costs increased 35%

• Output decreased 10% and total costs decreased 5%

• Output increased 40% and total costs increased 30%

Identify the example of external diseconomies of scale from the list below.

• Alienation of lower-level employees from management

• Communication and coordination breakdowns

• Increased rental expenses

• Increased bureaucracy

Identify the disadvantage being a smaller business.

• Access to capital

• Flexibility

• Freedom in decision-making

• Personalisation of services

Identify the disadvantage of being a larger business.

• Ability to provide additional value-added services

• Access to finance, high-quality labour and distribution channels

• Brand recognition and loyalty

• Flexibility to changes in the market