Economies Of Scale

Question 1

Purchasing

Answer 1

Business is given a discount for buying in larger quantities

Question 2

Financial

Answer 2

As a firm gets bigger, it will gain more assets. Bigger firms are likely to get cheaper loans because they have more security to offer to the bank

Question 3

Managerial

Answer 3

Large businesses can afford to employ specialist managers. This will increase efficiency

Question 4

Marketing

Answer 4

Larger firms can benefit from being able to use more effective methods of marketing which reach more people

Question 5

Technical

Answer 5

As a firm gets bigger, it can use better methods and equipment. For example a distribution business could buy a bigger lorry but it would still only need one driver

Question 6

Risk bearing

Answer 6

Large firms can spread risks by diversifying into different products or taking over suppliers

Question 7

Diseconomies of scale

Answer 7

Unit costs do not always fall as the scale of production is increased