12. Operational strategies: Scale and resource mix

Question 1

Economies of scale

Answer 1

The benefits enjoyed by a firm as a result of operating on a large scale leading to a fall in average costs

Question 2

Diseconomies of scale

Answer 2

The disadvantages experienced by a firm as a result of operating beyond optimum output, leading to a rise in average costs.

Question 3

Purchasing economies

Answer 3

Benefit of buying on a large scale leading to lower average costs from suppliers.

Question 4

Technical Economies

Answer 4

Ability of larger firms to buy technically advanced equipment and spread the cost over a larger number of units.

Question 5

Specialisation

Answer 5

The ability to employ specialists and for staff to concentrate on one particular function

Question 6

Average cost

Answer 6

Total cost/number of units

Question 7

Communication diseconomy

Answer 7

The breakdown in effective communication resulting from an increase in the size of operations.

Question 8

Coordination diseconomy

Answer 8

The breakdown in effective coordination resulting from an increase in the size of operations.

Question 9

Resource mix

Answer 9

The combination of capital and human resources utilised within a business to achieve the required output.

Question 10

Optimum resource mix

Answer 10

The combination of capital and human resources which allows for the greatest efficiency.

Question 11

Capital intensive

Answer 11

Businesses that rely more heavily upon capital equipment rather than labour.

Question 12

Labour intensive

Answer 12

Businesses that rely more heavily on labour than the capital equipment.