When a company grows its sales volume through international expansion, it can realize cost savings from economies of scale through all of the following except:
A) spreading fixed costs over its global sales volume.
B) utilizing its production facilities more intensely.
C) increased bargaining power with its suppliers.
D) learning effects associated with higher volume.
E) adopting high cost structures.

Question

Quizplus · Accepted Answer

Adopting high cost structures would not lead to cost savings from economies of scale. In fact, it would increase costs and reduce any potential cost savings. The other options - spreading fixed costs, utilizing production facilities more intensely, increasing bargaining power with suppliers, and learning effects associated with higher volume - all lead to cost savings through economies of scale.

When a Company Grows Its Sales Volume Through International Expansion