PRODUCTION CAPACITY AND ECONOMIES

Question 1

WHAT IS STANDARDIZATION AND WHY IS IT IMPORTANT?

Answer 1

IS THE CREATION OF STANDARD RULES AND GUIDELINES FOR PROCESSES. IT IS VERY IMPORTANT BECAUSE IT ALLOWS:
COST REDUCTION
MASS PRODUCTION
EASIER QUALITY CONTROL
REDUCES CUSTOMER UNCERTAINTY

Question 2

CONCEPT OF ECONOMIES

Answer 2

ALL THE ACTIVITIES THAT INVOLVE PRODUCTION AND CONSUMPTION OF GOODS AND SERVICES

Question 3

CONCEPT OF DEGREE OF SATURATION

Answer 3

IS THE ACTUAL PRODUCTION OF THE FIRM DIVIDED BY THE PRODUCTION CAPACITY

Question 4

ECONOMIES OF FIXED COST ABSORPTION

Answer 4

IS WHEN THE PRODUCTION CAPACITY IS SATURATED.
WHEN THE FIXED COSTS ARE SPREAD OVER THE NUMBER OF OUTPUTS, DECREASING COST PER UNIT

Question 5

ECONOMIES OF SCALE

Answer 5

IS THE REDUCTION OF COST PER UNIT BY INCREASING PRODUCTION CAPACITY

Question 6

SOURCES OF ECONOMIES OF SCALE

Answer 6

INVISIBILITY OF SOME INPUTS
ENHANCED INPUT PRODUCTIVITY DUE TO SPECIALIZATION
GEOMETRIC PROPERTIES
GREATER EFFICIENCY OF LARGER PLANTS AND ENGINES
LOWER PER UNIT PURCHASING COST

Question 7

ECONOMIES OF LEARNING

Answer 7

IS WHEN THE EXPERIENCE FROM EMPLOYEES DECREASES THE COSTS PER UNIT DUE TO HIGHER EFFICIENCY AND FASTER PRODUCTION

Question 8

SOURCES OF ECONOMIES OF LEARNING

Answer 8

ENHANCED SKILLS IN CARRYING OUT ACTIVITIES
MORE ACCURATE SELECTION OF RESOURCES
MORE EFFICIENT COMMUNICATION
HIGHER PROGRAMABILITY OF PROCESSES
SIMPLIFIED PRODUCTS AND PROCESSES

Question 9

ECONOMIES OF NETWORK EXTERNALITIES

Answer 9

OTHER SOURCES THAT ENCOURAGE A FIRM TO INCREASE ITS PRODUCTION CAPACITY THAT DO NOT INVOLVER REDUCING COSTS, BUT INCREASING DEMAND