Question 1

Which of the following would most likely occur if a firm exceeded its optimal production volume?&#10;A) Unit costs would decrease with each additional unit.&#10;B) Development costs would decrease unit costs.&#10;C) Fixed costs would increase unit costs.&#10;D) Unit costs would equal fixed costs.

Accepted Answer

Exceeding optimal production volume would lead to an increase in fixed costs, such as maintenance and supervision costs. As a result, the fixed cost per unit would increase, which would lead to an increase in unit costs. Therefore, option C is the correct answer. The other options are not applicable in this scenario.

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 ________.&#10;A) experience curve effects&#10;B) diseconomies of scale&#10;C) economies of scale&#10;D) inelasticity

Accepted Answer

When increasing production volume leads to a disproportionate increase in total cost, it is an example of diseconomies of scale. This can happen due to factors such as increased complexity of the production process, difficulty in coordinating larger teams and logistical issues.

Question 3

Economies of scale will most likely lead to ________.&#10;A) industry domination by a few large firms&#10;B) expansion of international niche markets&#10;C) investment in research and development&#10;D) creation of employee training opportunities

Accepted Answer

Economies of scale refer to the cost advantages that a company can achieve by increasing production. As production increases, various costs (such as fixed costs) can be spread across a larger number of units, leading to lower average costs. This often enables larger companies to offer products at lower prices than smaller firms, which can create a barrier to entry for new competitors. Therefore, economies of scale are likely to lead to industry domination by a few large firms.

Question 4

All of the following are most likely characteristics of firms with economies of scale EXCEPT ________.&#10;A) technology specialization&#10;B) market segmentation&#10;C) labor specialization&#10;D) purchasing power

Accepted Answer

Market segmentation does not directly relate to economies of scale. Technology specialization, labor specialization, and purchasing power all contribute to the ability of a firm to achieve economies of scale.

Question 5

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

Accepted Answer

Market leaders often achieve their position through superior efficiency, economies of scale, and effective management practices, which can offset bureaucratic challenges.

Question 6

Ford and Toyota are most likely able to achieve economies of scale by ________.&#10;A) increasing distribution distances&#10;B) serving global market segments&#10;C) segregating specialized workers&#10;D) exceeding production capacities

Accepted Answer

Ford and Toyota are both large multinational corporations that are able to achieve economies of scale by serving global market segments. By operating in multiple countries and regions, they can spread their fixed costs over a greater volume of production, allowing for greater efficiency and cost savings. Additionally, they are able to leverage their global supply chains to source materials and components from a variety of suppliers, further driving down costs.

Question 7

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

Accepted Answer

The answer of What is economies of scale? How can...

Question 8

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

Accepted Answer

Walmart's large-scale operations allow it to purchase goods in bulk, which often results in cost savings due to volume discounts offered by suppliers. This is an example of economies of scale.

Question 9

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

Accepted Answer

Dividing labor into specialized activities leads to economies of scale, not diseconomies of scale. Specialization allows workers to become more efficient and skilled in their specific tasks, leading to increased productivity and lower costs. However, there may be challenges in managing the complex organizational structure that results from specialization. These challenges can be overcome with effective management techniques, such as clear communication, coordination, and delegation of responsibilities.

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 ________.&#10;A) diseconomies of scale&#10;B) economies of scale&#10;C) the supply chain&#10;D) the value chain

Accepted Answer

This is an example of economies of scale, where as production volume increases, the average cost of production decreases. In this case, the cost does not increase proportionally with the increase in production, indicating that the company is experiencing cost advantages as it increases its output.

Question 11

Achieving economies of scale is most important to a firm with ________.&#10;A) high research and development costs&#10;B) complicated organizational structures&#10;C) numerous international market segments&#10;D) multiple business-to-business customers

Accepted Answer

The answer of Achieving economies of scale is most important...

Question 12

Diseconomies of scale would most likely occur for all of the following reasons EXCEPT ________.&#10;A) production volume exceeds capacity&#10;B) size of firm too large to manage&#10;C) employees lack motivation&#10;D) technology too specialized

Accepted Answer

The answer of Diseconomies of scale would most likely occur...

Question 13

According to economies of scale,each new unit that a company manufactures is ________.&#10;A) more expensive to produce than the previous unit&#10;B) less expensive to produce than the previous unit&#10;C) less expensive to produce than the next unit&#10;D) as expensive to produce as all other units

Accepted Answer

The answer of According to economies of scale,each new unit...

Question 14

According to the text,________ enable Coca-Cola to spend less advertising dollars per case of soft drinks than Schweppes spends.&#10;A) value chains&#10;B) fixed output costs&#10;C) economies of scale&#10;D) market share strategies

Accepted Answer

The answer of According to the text,________ enable Coca-Cola to...

Deck 11: Note : Economies and Diseconomies of Scale