Economies And Diseconomies Of Scale

Question 1

EoS purchasing

Answer 1

Large firms buy larger quantities and negotiate discounts

Question 2

EoS marketing

Answer 2

FC spread over more units in large firms so cost per unit is lower

Question 3

EoS technical

Answer 3

Large firms make products at a lower average cost so workers can specialise or have specialised equipment

Question 4

EoS managerial

Answer 4

Large firms employ specialists for better decision making abilities decreased management cost per unit

Question 5

EoS financial

Answer 5

Large firms can borrow money at a lower rate of interest because they are less risky for banks

Question 6

EoS risk bearing

Answer 6

Large firms can diversify into different product areas/markets which is more predictable for overall demand
More able to take risks because other activities of the firm allows them to absorb cost of failure more easily

Question 7

DoS communication

Answer 7

More difficult as firm grows affecting staff morale

Question 8

DoS wastage and loss

Answer 8

Can increase because materials might be in plentiful supply

Question 9

DoS coordination

Answer 9

More difficult to coordinate activities between different divisions and departments

Question 10

DoS control

Answer 10

Managers may be less able to control what’s going on

Question 11

DoS ‘them and us’ attitude

Answer 11

In different parts of large firms workers may put their departments interests before the company’s