Micro

Question 1

Risk-bearing:

Answer 1

When a firm becomes larger, they can expand their production range.
Therefore, they can spread the cost of uncertainty. If one part is not successful, they
have other parts to fall back on.

Question 2

Financial:

Answer 2

: Banks are willing to lend loans more cheaply to larger firms, because they
are deemed less risky. Therefore, larger firms can take advantage of cheaper credit.

Question 3

Managerial:

Answer 3

: Larger firms are more able to specialise and divide their labour. They
can employ specialist managers and supervisors, which lowers average costs

Question 4

Technological:

Answer 4

Larger firms can afford to invest in more advanced and productive
machinery and capital, which will lower their average costs.

Question 5

Marketing

Answer 5

Larger firms can divide their marketing budgets across larger outputs, so
the average cost of advertising per unit is less than that of a smaller firm.

Question 6

Purchasing

Answer 6

Larger firms can bulk-buy, which means each unit will cost them less. For
example, supermarkets have more buying power from farmers than corner shops, so
they can negotiate better deals.