External growth (Economies of scale)

Question 1

economies of scale

Answer 1

when unit costs(cost per item they make) fall as output increases

Question 2

types of economies of scale

Answer 2

1. purchasing
2. managerial
3. marketing
4. technical
5. financial
6. risk bearing

Question 3

purchasing EOS

Answer 3

buying in bulk

bigger companies = better rates/prices for raw materials

Question 4

managerial EOS

Answer 4

bigger businesses can have more specialist workers who are more efficient = lower unit costs

Question 5

marketing EOS

Answer 5

bigger businesses can spread the fixed cost of marketing over a higher output

Question 6

technical EOS

Answer 6

bigger businesses can spread the fixed cost of machinery over a higher output
business grows and can use machinery

Question 7

financial EOS

Answer 7

bigger businesses can spread fixed costs of interest over higher output plus also get lower rates

Question 8

risk bearing EOS

Answer 8

bigger businesses can spread cost of one part of business failing over the rest of the business output
reducing unit cost of failure

Question 9

dis economies of scale

Answer 9

unit costs rise as output increase

1. communication
2. co-ordination
3. motivation