Deck 11: Note : Economies and Diseconomies of Scale

Question 1

Which of the following would most likely occur if a firm exceeded its optimal production volume?

A) Unit costs would decrease with each additional unit.
B) Development costs would decrease unit costs.
C) Fixed costs would increase unit costs.
D) Unit costs would equal fixed costs.

Answer 1

C

Question 2

When Company X increases its production volume by 1%,the firm's total cost of production increases by more than 1%.This is an example of ________.

A) experience curve effects
B) diseconomies of scale
C) economies of scale
D) inelasticity

Answer 2

B

Question 3

Economies of scale will most likely lead to ________.

A) industry domination by a few large firms
B) expansion of international niche markets
C) investment in research and development
D) creation of employee training opportunities

Answer 3

A

Question 4

All of the following are most likely characteristics of firms with economies of scale EXCEPT ________.

A) technology specialization
B) market segmentation
C) labor specialization
D) purchasing power

Question 5

Market leaders are typically less efficient than firms with lower share because larger firms suffer from bureaucratic logistical issues.

Question 6

Ford and Toyota are most likely able to achieve economies of scale by ________.

A) increasing distribution distances
B) serving global market segments
C) segregating specialized workers
D) exceeding production capacities

Question 7

What is economies of scale? How can a firm achieve economies of scale?

Question 8

Walmart's purchasing power enables the firm to benefit from economies of scale and receive volume discounts from suppliers.

Question 9

Dividing labor into specialized activities leads to diseconomies of scale because the resulting organizational structure is too difficult to manage.

Question 10

When Company X increases its production volume by 1%,the firm's total cost of production increases by less than 1%.This is an example of ________.

A) diseconomies of scale
B) economies of scale
C) the supply chain
D) the value chain

Question 11

Achieving economies of scale is most important to a firm with ________.

A) high research and development costs
B) complicated organizational structures
C) numerous international market segments
D) multiple business-to-business customers

Question 12

Diseconomies of scale would most likely occur for all of the following reasons EXCEPT ________.

A) production volume exceeds capacity
B) size of firm too large to manage
C) employees lack motivation
D) technology too specialized

Question 13

According to economies of scale,each new unit that a company manufactures is ________.

A) more expensive to produce than the previous unit
B) less expensive to produce than the previous unit
C) less expensive to produce than the next unit
D) as expensive to produce as all other units

Question 14

According to the text,________ enable Coca-Cola to spend less advertising dollars per case of soft drinks than Schweppes spends.

A) value chains
B) fixed output costs
C) economies of scale
D) market share strategies