5 Growth (Economies)

Question 1

Define economies of scale

Answer 1

the reduction in average costs experienced by a business as output increases.

Question 2

Define internal economies of scale

Answer 2

the cost reductions experienced by a single businesses as it grows (benefits of growth that arise within a firm.)

Question 3

Define external economies of scale

Answer 3

the reductions in average costs experienced by all businesses as the industry grows.

Question 4

Define indivisibility

Answer 4

the physical or economical inability to run a machine below its optimal operational capacity.

Question 5

Define minimum efficient scale

Answer 5

the output that minimises long run average costs.

Question 6

Define sole trader

Answer 6

a business organisation that has a single owner.

Question 7

Define venture capitalist

Answer 7

an individual that provides funds for small- to medium sized businesses that may be considered risky for investors in banks.