economies of scale Flashcards
(12 cards)
What are purchasing economies of scale?
Purchasing higher quantities of raw materials from suppliers leading to better negotiation of discounts
This results in a fall in average unit costs.
How do marketing economies of scale benefit larger businesses?
They can produce promotional material on a larger scale, spreading costs over more units
This reduces the average cost per exposure.
What are managerial economies of scale?
Employing specialist managers for specific functions to increase efficiency and productivity
This results in a fall in average unit costs.
What are financial economies of scale?
Larger businesses can secure loans more easily and receive more attractive loan terms
This includes lower interest rates, leading to lower average costs.
What is meant by risk bearing economies of scale?
Businesses can spread the costs of uncertainty over a wider range of activities
This reduces unit costs as they grow.
Define technical economies of scale.
Investing in advanced technology or new production methods to increase productivity
This results in lower average unit costs.
Fill in the blank: Purchasing economies of scale lead to a fall in average unit costs due to _______.
better negotiation of discounts for bulk buying
True or False: Managerial economies of scale can lead to decreased efficiency.
False
What effect does financial economies of scale have on loan terms?
Larger businesses are offered more attractive loan terms, including lower interest rates.
Fill in the blank: Marketing economies of scale allow businesses to spread promotional costs over a greater number of _______.
business units
What is a direct benefit of technical economies of scale?
Increased productivity and efficiency leading to lower average unit costs.
