Question 1

MediDose Inc., a pharmaceutical company, has been studying and experimenting with a few drugs.After 10 years of conducting and standardizing tests, the company comes up with positive results that would help many patients.These drugs become popular and effective among millions of patients and enable the company to expand its operations across the globe while spreading out the cost of the studies.Which of the following is the subject of economies of scale in the described scenario?
A) Research and development expenses
B) Advertising expenses
C) General and administrative costs
D) Production costs

Accepted Answer

Research and development expenses are spread out as the drugs become popular and effective, demonstrating economies of scale in the scenario described.

Question 2

The expenses and taxes that are directly related to the wide-ranging operation of a company best define the term _____.
A) sunk costs
B) research and development costs
C) incentives and promotional costs
D) general and administrative costs

Accepted Answer

General and administrative costs are expenses and taxes that are directly related to the wide-ranging operation of a company, including salaries of staff, rent of office space, utilities, and other overhead expenses. Sunk costs are costs that have already been incurred and cannot be recovered, research and development costs are expenses related to creating and improving products or processes, and incentives and promotional costs are expenses related to attracting customers or promoting products.

Question 3

Nirvana Publishing House invested on high-end printing equipment.After a year of production, the company had to double the amount of production of its newspapers and weekly magazine because of high customer demand.However, the company did not have to invest in another similar equipment to meet demands.This is an example of a _____.
A) fixed cost of demand
B) fixed cost of scale
C) fixed cost of production
D) fixed cost of supply

Accepted Answer

The situation describes a fixed cost of production, where the initial investment in equipment does not change despite an increase in production levels.

Question 4

A reduction in costs per unit due to increases in efficiency of production as the number of goods being produced increases best defines the term _____.
A) economies of scope
B) economies of finance
C) economies of scale
D) economies of wealth

Accepted Answer

Economies of scale is the term that best defines the reduction in costs per unit due to increases in efficiency of production as the number of goods being produced increases.

Question 5

Blaze Corp., a car company, shared its costs of producing cars.It did so by introducing the production of car accessories that are used by customers to upgrade or customize their cars.Blaze Corp.started selling car accessories such as engine oils, wheels, and music player and thus shared its market research costs between cars and car accessories.This led to a definite decrease in the overall cost of production.This scenario best illustrates _____.
A) economies of scale
B) economies of finance
C) economies of wealth
D) economies of scope

Accepted Answer

The scenario described exemplifies economies of scope, which refers to the cost savings that a company can achieve by producing a wider range of products or services. By sharing its market research costs between cars and car accessories, Blaze Corp was able to decrease its overall cost of production. This is an example of the benefits that can be gained from diversifying a company's offerings.

Question 6

Turbine Industries breaks down its manufacturing process into smaller segments that are performed by employees who are trained very well.This also helps the firm to save time because this way the employees do not need to juggle between various tasks.This scenario best illustrates _____.
A) minimum efficient scale
B) competitive parity
C) employee specialization
D) task specialization

Accepted Answer

Task specialization refers to breaking down the manufacturing process into specific tasks that are performed by specialized employees. This can help to save time and increase efficiency within the production process.

Question 7

The Finance Department of Neptune Industries has to audit expenses and profits made each year.It creates separate databases for costs accrued in the form of equipment used in the company and for other costs such as costs of accounting, rent, and managerial salaries.Which of the following is the subject of economies of scale in the described scenario?
A) Research and development expenses
B) General and administrative costs
C) Incentives and promotional costs
D) Advertising expenses

Accepted Answer

General and administrative costs are the subject of economies of scale in the described scenario as they are being audited and tracked separately from other costs. This suggests that Neptune Industries is likely trying to identify opportunities for cost savings or efficiency improvements in this area. Research and development expenses, incentives and promotional costs, and advertising expenses are not specifically mentioned and are therefore less likely to be the focus of the department's efforts.

Question 8

Which of the following is a primary characteristic of employing automated equipment in a company with high levels of production?
A) They help employees to acquire specialized knowledge that helps them complete tasks more efficiently.
B) The general and administrative costs would be high for large companies.
C) They do not help in spreading out the fixed cost of production.
D) Large companies can reduce per-unit cost of production.

Accepted Answer

Automated equipment can help large companies reduce per-unit cost of production by increasing efficiency and productivity, as well as reducing the need for manual labor. This can lead to economies of scale and cost savings for the company. The other options do not accurately describe a primary characteristic of employing automated equipment.

Question 9

Which of the following is a feature of task specialization?
A) It causes workers to be confused about the task at hand.
B) It enables employees to choose tasks that they are most capable of performing.
C) It enables workers to be more efficient and thus enables them to avoid loss of time.
D) It results in job dissatisfaction because employees have to repeat the same functions over time.

Accepted Answer

Task specialization enables workers to focus on a particular task or function, allowing them to become more proficient at it. This increased efficiency results in time and cost savings for the organization.

Question 10

What is true about a minimum efficient scale?
A) It shows the optimal quantity for a company to produce.
B) It can be most efficiently maintained in large industries by increasing the level of production.
C) It proves that the costs per unit decrease with increases in volume till they reach and then maintain the minimal level.
D) It can be achieved by large industries during economic downturns because they can easily spread their fixed costs when demand declines.

Accepted Answer

The answer of What is true about a minimum efficient...

Question 11

Connections Communications Inc.has been able to achieve optimal efficiency by identifying a task for each employee and enabling them to become thoroughly proficient in their tasks.The company has realized that employees develop an expertise in their specified job profile over time and they gradually begin to work faster than when they started the job.This is an example of _____.
A) task specialization
B) employee specialization
C) minimum efficient scale
D) competitive parity

Accepted Answer

The answer of Connections Communications Inc.has been able to achieve...

Question 12

The increased efficiency that results when employees perform a narrow range of tasks over and over again leading them to acquire specialized knowledge that helps them complete the task more efficiently accurately defines the term _____.
A) competitive parity
B) minimum efficient scale
C) task specialization
D) employee specialization

Accepted Answer

The answer of The increased efficiency that results when employees...

Question 13

Breaking a large process into smaller elements that require specialized knowledge is known as _____.
A) professional specialization
B) employee specialization
C) task specialization
D) process specialization

Accepted Answer

Task specialization involves breaking down a large process into smaller elements that require specialized knowledge. This can result in increased efficiency and productivity within an organization, as individuals can focus on performing specific tasks in which they have expertise. Professional specialization and employee specialization refer more broadly to individuals focusing on particular areas within their field or company, rather than specific tasks within a process. Process specialization refers to companies specializing in particular products or services.

Question 14

The relatively fixed costs such as the costs of plant and equipment, which do not increase with an increase in the number of units manufactured, are known as _____.
A) fixed cost of production
B) fixed cost of supply
C) fixed cost of demand
D) fixed cost of scale

Accepted Answer

The relatively fixed costs such as the costs of plant and equipment, which do not increase with an increase in the number of units manufactured, are known as fixed cost of production. Fixed costs of supply and demand are not commonly used terms and do not accurately describe the type of cost being discussed. Fixed cost of scale is not a commonly used term and may be confused with economies of scale, which refers to the cost advantages of producing on a larger scale.

Question 15

Taurus Inc.usually produces 5,000 handcrafted products in a day.Recently, the demand for handcrafted products drastically increased as one of its products became a popular item for home décor.Due to this increase, the company had to up its production level to 10,000 products per day.This, however, decreased the price of individual products.This scenario best illustrates _____.
A) economies of wealth
B) economies of finance
C) economies of scope
D) economies of scale

Accepted Answer

The scenario of Taurus Inc. increasing its production level to meet the increased demand and decreasing the price of individual products due to the increase best illustrates economies of scale. This is because the company was able to achieve cost efficiencies through increased production, which led to a reduction in per-unit costs of production and subsequently a decrease in the price of individual products.

Question 16

Attire Corp., a garment manufacturing company, explains to its employees why its previous year's sales had not met the required standards.The management uses a diagram of the cost acquired for each item manufactured against the volume of items produced in a particular period of time.The pictorial representation is an example of the _____.
A) scale curve
B) value curve
C) learning curve
D) experience curve

Accepted Answer

The answer of Attire Corp., a garment manufacturing company, explains...

Question 17

Fuchsia Corp., a retail chain, opens four outlets in different locations of a city.It markets itself for attracting customers to these locations.The company invests in promotional campaigns for one of the outlets and then divides the expenses among the four outlets.Which of the following is the subject of economies of scale in the described scenario?
A) Production costs
B) General costs
C) Research and development expenses
D) Advertising expenses

Accepted Answer

The subject of economies of scale in the scenario is the advertising expenses. By dividing the promotional expenses among the four outlets, Fuchsia Corp. is taking advantage of economies of scale, as the cost per outlet decreases with the increase in the number of outlets. This helps in reducing the overall advertising expenses and increasing the potential for higher profits.

Question 18

Which of the following statements is true of a company's general and administrative costs (G&A)?
A) They are part of a company's production costs.
B) They exclude the expenses of operating a company.
C) They include Research and Development (R&D) expenses.
D) They help a company with high sales volume that creates cost advantage by managing its G&A across more units.

Accepted Answer

General and administrative costs (G&A) are not part of a company's production costs, and they do not exclude the expenses of operating a company. They can include Research and Development (R&D) expenses, but this is not always the case. Managing G&A costs effectively can help a company with high sales volume create a cost advantage by spreading these costs across more units. Therefore, option D is the correct statement.

Question 19

Which of the following statements is true of research and development (R&D)?
A) Small volumes of production enable firms to spread the cost of research and development (R&D), advertising, and general and administrative expenses.
B) The higher a firm's R&D costs, the more the scope for the company to expand globally allowing costs to be spread across more customers.
C) Adding R&D allows a firm to have a cost advantage over competitors.
D) Eliminating R&D helps firms to lead in launching new product designs.

Accepted Answer

B) The higher a firm's R&D costs, the more the scope for the company to expand globally allowing costs to be spread across more customers. This is true because significant investment in R&D can lead to innovations and improvements that make a company's products or services more competitive on a global scale. This, in turn, can increase the customer base over which the R&D costs are spread, potentially reducing the per-unit cost and enhancing the company's competitive position.

Question 20

DFN Inc.expanded its manufacturing plant to employ more equipment because the management of the company thought this would help them attain more sales.Unfortunately, this affected the cost of each unit produced because the company invested more finances for better equipment.This also led to a decrease in sales as customers were not willing to buy the product for an increased price.This scenario best illustrates _____.
A) competitive failure
B) diseconomies of scale
C) economies of scale
D) virtuous circle

Accepted Answer

Diseconomies of scale occur when a company expands its production beyond a certain point, resulting in a decrease in efficiency and an increase in per-unit cost. This is what happened in the given scenario as the company invested in more equipment, but it resulted in an increased price of the product, leading to a decrease in sales.

Quiz 4: Cost Advantage

The expenses and taxes that are directly related to the wide-ranging operation of a company best define the term _____.

A reduction in costs per unit due to increases in efficiency of production as the number of goods being produced increases best defines the term _____.

Turbine Industries breaks down its manufacturing process into smaller segments that are performed by employees who are trained very well.This also helps the firm to save time because this way the employees do not need to juggle between various tasks.This scenario best illustrates _____.

Which of the following is a primary characteristic of employing automated equipment in a company with high levels of production?

Which of the following is a feature of task specialization?

What is true about a minimum efficient scale?

The increased efficiency that results when employees perform a narrow range of tasks over and over again leading them to acquire specialized knowledge that helps them complete the task more efficiently accurately defines the term _____.

Breaking a large process into smaller elements that require specialized knowledge is known as _____.

The relatively fixed costs such as the costs of plant and equipment, which do not increase with an increase in the number of units manufactured, are known as _____.

Which of the following statements is true of a company's general and administrative costs (G&A) ?

Which of the following statements is true of research and development (R&D) ?