R and D

Question 1

The three elements of design

Answer 1

ascetics
function
cost of creating the product

Question 2

technical economies of scale

Answer 2

the larger the business, the more it can afford to invest

Question 3

specialisation economies of scale

Answer 3

the larger the workforce the more production can be split into different activities

Question 4

purchasing economies of scale

Answer 4

the larger the business the more it can bulk order materials at a discount.

Question 5

managerial economies of scale

Answer 5

specialists are employed by large manufacturers to supervise production

Question 6

external economies of scale

Answer 6

whole industry grows in size so they can reduces unit costs over more products sold.

examples:

• research and development
• relocation of suppliers of parts
• investment in industry

Question 7

Diseconomies of scale

Answer 7

A business grows so large that the costs per unit increase which occurs with

• poor internal communication
• poor employee motivation
• overtrading

Question 8

benefits of staying small

Answer 8

+ product differentiation and a USP
+ flexibility in responding to customer’s needs
+ excellent customer service

Question 9

benefits of economies of scale

Answer 9

• greater competitiveness leads to larger market share
• lower unit costs leads to higher profit margin
• shareholders receive larger dividends

Question 10

problems of large market share

Answer 10

• higher risk of diseconomies of scale cannot react to change in markets
• adopt monopolistic tendencies and get fined by competition authorities
• lose sight of the customer, dissatisfaction, loss of sales and lower profits