Question 1

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

False

Question 2

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

Large firms have economies of scale, which means they can spread their fixed costs over more units of output, resulting in lower average costs. This allows them to invest in expensive machinery and technologies that can lead to more efficient production processes and higher levels of output. Small firms, on the other hand, may not have the resources to purchase and operate such machinery.

Question 3

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, not just a single market or industry.

Question 4

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 is the basic principle of economies of scale, where there are cost advantages to increasing production until a certain point, after which there may be additional costs that outweigh the benefits of production.

Question 5

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 commonly used generic business strategies that are recognized and utilized by many organizations.

Question 6

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

Accepted Answer

This statement is true. When manufacturing processes become too large, it can be difficult and inefficient to manage them, leading to diseconomies of scale. For example, larger machines might be more expensive to operate, require more maintenance, or have a higher risk of errors or breakdowns. Additionally, if the demand for the product being manufactured is not high enough to justify the use of a very large production facility, the company may end up experiencing unnecessary costs and loss of efficiency.

Question 7

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

The answer of If a firm gets too large, it...

Question 8

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

Accepted Answer

Access to productive inputs such as raw materials, labor, and technology can significantly affect a firm's costs of production. If some firms have lower-cost access to these inputs compared to others, it may create cost differences among firms producing similar products in an industry. This may give some firms a competitive advantage, while others may struggle to compete.

Question 9

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

The answer of The link between volume of production and...

Question 10

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

Accepted Answer

The learning curve shows how the cumulative volume of production affects the cost per unit. As cumulative production increases, the cost per unit decreases due to factors such as improved efficiency and reducing errors in the manufacturing process.

Question 11

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

Accepted Answer

Cost advantages can be achieved through various methods such as economies of scale, efficient production methods, and access to cheaper raw materials or labor. Therefore, competing firms producing similar products may still have cost advantages over each other.

Question 12

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

Accepted Answer

The answer of Efforts to move down the learning curve...

Question 13

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 can become more challenging, which can lead to higher costs associated with managing the firm. This is known as the "cost of complexity."

Question 14

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 be applied to any business function, including marketing, distribution, and customer service, in addition to manufacturing.

Question 15

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 16

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

Accepted Answer

Increased worker specialization can lead to boredom and lack of variety in tasks, which can decrease worker motivation and ultimately affect production levels. It can also lead to higher training costs and decreased flexibility in the workforce, which can result in diseconomies of scale.

Question 17

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

Accepted Answer

While economies of scale in manufacturing can reduce unit costs, transportation costs can increase the total cost of delivering goods to the final destination, offsetting some of the cost reductions achieved through manufacturing efficiencies.

Question 18

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

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

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 definition accurately describes economies of scale, which occur when a company's production costs decrease as it grows and produces more units.

Quiz 4: Cost Leadership