economies of scale

Question 1

what is it

Answer 1

help understand benefits of businesses of growth and expansion. shows when a business grows and level of output increases, cost per unit decreases

Question 2

internal

Answer 2

purchasing
marketing
technical
managerial
financial

Question 3

purchasing

Answer 3

becomes cheaper for larger businesses to produce unit of output as they can purchase in bulks from suppliers therefore can negotiate discounts per unit for being a more valued customer

Question 4

marketing

Answer 4

can split its marketing costs over more units of production. can purchase advertising space in magazines for example in larger quantities and can demand discounts

Question 5

technical

Answer 5

large businesses can invest into larger mechanisations, more up to date machinery which can produce more products faster therefore increasing efficiency which decreases waste therefore decreases unit costs

Question 6

managerial

Answer 6

small businesses can’t afford to invest into specialisation. as B increases scale of operations the b becomes more viable to invest into specialist manager who can work in operations of finance. increase productivity and decrease cost per unit of output

Question 7

financial

Answer 7

As B grows they have access to sources of finance that smaller businesses don’t. they can obtain bank loans at more competitive rates of interest as they borrow in larger sums therefore can negotiate lower rates of interest as they become a more valuable client for financial institutions like banks

Question 8

external

Answer 8

(all business in industry may experience the same reduction in costs)
infrastructure
technology
knowledge

Question 9

infrastructure

Answer 9

national GOV may invest into new infrastructure projects where all orgamsoation in an industry may benefit from. such as new transport links which can increase productivity where then all businesses experience receive a shared reduction in unit costs

Question 10

technology

Answer 10

new innovations and inventions may create advancements in technology where all businesses in the industry can benefit of it.

Question 11

knowledge

Answer 11

industry may all be clustered in a same geographical location therefore may benefit from the level of expertise around them which they can then foster. example unis may be produced.