Johnson Enterprises manufactures computer chips used in cell phones.The MNE has long production runs that lower the per unit cost of each chip.The firm also purchases materials in bulk from its suppliers with whom Johnson has long-term contracts.Johnson is most likely benefiting from ________.
A)economies of scale
B)the cluster effect
C)digitization
D)location economies

Question

Quizplus · Accepted Answer

Johnson Enterprises is benefitting from economies of scale, which refers to the cost advantages obtained due to the increase in production scale, as the long production runs lower the per-unit cost of each chip.

Johnson Enterprises Manufactures Computer Chips Used in Cell Phones