Question 1

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized by product manufacturing,such as chemical and oil refining.

Accepted Answer

False

Question 2

If a firm gets too large,it will eventually experience both diseconomies of scale and an increase in costs associated with the learning-curve effect as cumulative volume of production grows.

Accepted Answer

False

Question 3

Efforts to move down the learning curve quickly by acquiring market share are likely to generate only normal economic performance.

Accepted Answer

Acquiring market share quickly can lead to normal economic performance because it can spread resources too thin and prevent the company from focusing on innovation and efficiency.

Question 4

When a firm has high levels of production,it is often able to purchase and use manufacturing tools that cannot be kept in operation in small firms.

Accepted Answer

This statement is true because larger firms have more financial resources to invest in expensive manufacturing tools, and they are able to achieve economies of scale when producing at high levels. Small firms, on the other hand, may not have the capital or demand to justify the expense of certain tools, and may have to rely on manual or less efficient processes.

Question 5

Increased worker specialization associated with higher levels of production can lead to worker de-motivation and diseconomies of scale.

Accepted Answer

Increased worker specialization may lead to monotony and boredom, leading to worker de-motivation. Additionally, if there is over-specialization or too little flexibility in the workforce, it can lead to inefficiencies and diseconomies of scale.

Question 6

High volumes of production are also associated with high levels of generality in employee tasks and as workers become increasingly generalized in accomplishing a variety of tasks,they can become more effective at these tasks,thereby reducing the firm's costs.

Accepted Answer

The answer of High volumes of production are also associated...

Question 7

Economies of scale focus on the relationship between the cumulative volume of production and average unit costs,while the learning curve focuses on the relationship between the volume of production at a given time and average unit costs.

Accepted Answer

The statement is incorrect. It should be:

"Economies of scale focus on the relationship between the volume of production at a given time and average unit costs, while the learning curve focuses on the relationship between the cumulative volume of production and average unit costs."

Question 8

The link between cumulative volumes of production and cost has been formalized in the concept of the learning curve.

Accepted Answer

The learning curve theory states that as the cumulative production of a product increases, the cost per unit decreases at a predictable rate.

Question 9

As the volume of production in a firm increases,the average cost per unit decreases until some optimal volume of production is reached,after which the average costs per unit of production begin to rise because of diseconomies of scale.

Accepted Answer

This statement correctly describes the concept of economies of scale.

Question 10

As a firm increases in size,it often increases in complexity; however,the ability of managers to control and operate the firm efficiently are virtually unlimited and therefore costs do not substantially increase.

Accepted Answer

As a firm increases in size and complexity, the ability of managers to control and operate the firm efficiently becomes limited, and costs tend to substantially increase.

Question 11

In general,cost advantages are not possible when competing firms produce similar products.

Accepted Answer

Cost advantages can still be achieved through various means such as improved production processes, better supply chain management, and economies of scale. However, the level of cost advantage may be limited when firms are producing similar products and have similar cost structures.

Question 12

Economies of scale are said to exist when the increase in firm size (measured in terms of volume of production)are associated with lower costs (measured in terms of average costs per unit of production).

Accepted Answer

This is the definition of economies of scale. As a firm increases its volume of production, it can spread its fixed costs over a larger number of units, leading to lower average costs per unit. Additionally, bulk purchasing and other efficiencies may also reduce costs.

Question 13

Differential low-cost access to productive inputs may create cost differences among firms producing similar products in an industry.

Accepted Answer

Differential low-cost access to productive inputs such as raw materials, labor, and technology can impact the production cost and create cost differences among firms producing similar products in an industry. Firms with low-cost access to inputs may have a competitive advantage over others, leading to differences in pricing and profitability.

Question 14

There are physical limitations to the size of some manufacturing processes and when this size is exceeded,diseconomies of scale are experienced.

Accepted Answer

When manufacturing processes exceed a certain size, it becomes difficult and costly to manage and control them effectively, resulting in diseconomies of scale. This can be due to factors such as increased transportation costs, more complex machinery, and greater difficulty in maintaining quality control. Therefore, physical limitations can impact the efficiency of manufacturing processes.

Question 15

Large transportation costs can offset cost reductions attributable to the exploitation of economies of scale in manufacturing.

Accepted Answer

This statement is true. Even if a company is able to achieve economies of scale in manufacturing, these cost reductions can be negated by the expenses of transporting goods over long distances.

Question 16

Firms that are successful in pursuing a cost-leadership strategy focus solely on keeping costs low and abandoning other business or corporate strategies.

Accepted Answer

The answer of Firms that are successful in pursuing a...

Question 17

Cost leadership and product differentiation are so widely recognized that they are often called generic business strategies.

Accepted Answer

Cost leadership and product differentiation are two of the most commonly recognized and studied business strategies, and are often referred to as generic strategies.

Question 18

Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.

Accepted Answer

Corporate level strategies are actions firms take to gain competitive advantages across multiple markets or industries, while business level strategies are actions firms take to gain competitive advantages in a single market or industry.

Question 19

A firm that chooses a cost-leadership business strategy focuses on gaining advantages by reducing its costs to a level equal to all of its competitors.

Accepted Answer

The answer of A firm that chooses a cost-leadership business...

Question 20

Learning curve-cost advantages are restricted solely to manufacturing and the advantage associated only with the manufacturing business function.

Accepted Answer

The learning curve-cost advantages can also occur in other business functions such as marketing, distribution, and customer service.

Quiz 4: Cost Leadership