1.2.3 economies of scale

Question 1

Economies of scale

Answer 1

Falling average costs due to expansion

Question 2

Internal economies of scale

Answer 2

Costs that can be controlled by the firm that individual firms can enjoy when expanded

Question 3

I-EOS Purchasing (bulk-buying)

Answer 3

Buying a lot of resources at once so that there are cheaper rates

Question 4

I-EOS Marketing (advertising, promotions, brand names)

Answer 4

Costs are spread over more units of output so that there are smaller average costs for large firms

Question 5

I-EOS Technical (machinery, tech, specialisation)

Answer 5

There is more efficiency due to larger factories, improved technology, etc.

Question 6

I-EOS Financial

Answer 6

Large firms have easier access to money (banks, trusts)

Question 7

I-EOS Managerial

Answer 7

More specialists can be hired leading to increased efficiency

Question 8

I-EOS Risk-bearing

Answer 8

Smaller branches within firms to reduce risk (products, locations, etc.)

Question 9

I-EOS Research and development

Answer 9

Investing more in researching and developing new ideas/products

Question 10

External economies of scale

Answer 10

Costs that are not/cannot be controlled by individual firms the whole industry can enjoy when expanded

Question 11

E-EOS Skilled labour

Answer 11

If an industry is concentrated in one area, there may be a build-up of labour with the skills and work experience within that industry (specialists)

Question 12

E-EOS Infrastructure

Answer 12

If an industry dominates a region, the transport and buildings can be shaped to suit that industry’s needs

Question 13

E-EOS Access to suppliers

Answer 13

If firms are closer to suppliers, there will be higher efficiency and reduce in shipping costs

Question 14

E-EOS Similar businesses in one area

Answer 14

Firms can cooperate with one another and that certain place can be well-known for a certain industry