BENEFITS OF GROWTH - ECONOMIES OF SCALE

Question 1

a business may pursue growth becasue of eos of scale t/f

Answer 1

t

Question 2

what are the 4 types of economies of sclae

Answer 2

purchasing
managerial
financial
techmnological

Question 3

definition of eos

Answer 3

occur when unit costs fall as a business expands ,

Question 4

economies of scalre realte to teh

Answer 4

volume of output

Question 5

what is purchasing eos

Answer 5

As bs gets bigger its output increases so it will purchase more supplies such as rm and components.

Question 6

what do purchasing eos give business over suppliers

Answer 6

power over suppleirs

Question 7

why doees business gain power over suppliers from purchasing eos

Answer 7

casue busoiness becomes more important as theyre buying more supplies/rm/components fromthe supplier

Question 8

during purchasing eos , suppliers become waht on businesses

Answer 8

dependent

Question 9

since suppliers become dependent on bs as a result of bs beocming more important to tehm and buying more supplies

what may they be willing to do

Answer 9

reduces prices to keep the businesses orders

Question 10

give rea; ;ofe example of epurchasing eos gone wrong

hint supermarkets

Answer 10

big supermarkets accused of psuhing price they pay to farmrers for milk below actual cop

Question 11

what is technological eos

Answer 11

Occur when a large scale of operations enables particular technologies to be used efficiently

Question 12

give example of technological eos - productoin line for car manufacturing industry

Answer 12

if only one car produced it would be incredibly expensive but if production line spread over many thousand of cars(as bs increases output) UC fall - hence why car comp eager to ensure demand is high

Question 13

technological eos are importnat fofr bs that have …..

such as

Answer 13

very high fixed costs

such as energy firms

Question 14

technological eos can also be associated with

Answer 14

movement from job production to job flow

Question 15

explain technologicla eos froma fianncial pov

Answer 15

as bs increases output and grows

they have more finances

therfore theyre able to by a better quantity or quality of capital

this leads to mroe productivity in the business

therfore a reduction in the auc

Question 16

ealting to technological eos froma financial pov

when productivity increases what does htis mean for the ratio of ouptut to input

Answer 16

ratio of output from the same input has increased

Question 17

explain finanical eos

Answer 17

As bs gets bigger it has more assets and this may mean a bank is willing to lend to it at a lower ir as the risk is lower

Question 18

financial eos reduce

Answer 18

ir costs

Question 19

if a company fails to repay its loans what can the bank do

Answer 19

seize its assets

Question 20

what is managerial EOS

Answer 20

As a bs expands may bring in specialist managers to focus on parts of the bs

Question 21

specialist managers brought in are paid a

Answer 21

substantial wage

Question 22

explain managerial eos through an example - HR

compare with small bs

Answer 22

E.g expanding bs may create a spedialsit hr dpt which is probably not cost effective in a small bs
Expertise enable better dm in larger company which can increase efficiency and reduce unit costs

YES COSTS INCREASE INTIALLY BUT OUTWEIGHED BY THE EFFICIECNY GAINS