unit costs and efficiency

Question 1

unit costs formula

Answer 1

total production costs in period divided by total output in period

Question 2

economies of scale

Answer 2

• arise when unit costs fall as output increases

Question 3

internal v external economies of scale

Answer 3

• internal
• arise from increased output of business itself

external -
- occur within industry

Question 4

internal economies of scale

Answer 4

buying in greater quantiity- lower price

• technical = boost productivity
• finance= larger firms = access to cheaper and more finance

Question 5

external economies of scale

Answer 5

• arise from industry as a whole -

Question 6

labour v capital intensity

Answer 6

labour intensive =
production relies on using labour resources

capital intensive =
production relies on using capital resources

Question 7

benefits and drawbacks of capital intensity

Answer 7

benefits
-greater opportunity of economies of scale
- lower labour costs
-better quality and speed

drawbacks-
- significant investment
- may generate resistance to change from labour force

Question 8

benefits and drawbacks of labour intensity

Answer 8

beenfits -
- unit costs may still be law in low wage locations
-

drawback s- greater risk of problems with employee/ employer relationship