Economies of scale in activities such as R&D,new product development,advertising,and government lobbying arise mainly because of:
A)Specialization-as these activities grow in scale,there are productivity gains from division of labor
B)Indivisibilities-these activities involve large fixed costs that can be spread over a larger volume of output
C)Technical input-output relationships-increases in output do not require proportionate increases in input
D)Increased bargaining power-large companies can negotiate lower input prices for these activities

Question

Quizplus · Accepted Answer

Economies of scale in activities such as R&D, new product development, advertising and government lobbying arise mainly because these activities involve large fixed costs that can be spread over a larger volume of output. This is due to the presence of indivisibilities, whereby increases in output do not require proportionate increases in input. As the scale of these activities grows, there are productivity gains from division of labor, which further reinforces the economies of scale. However, specialization (A), technical input-output relationships (C), and increased bargaining power (D) are not the primary drivers of economies of scale in these activities.

Economies of Scale in Activities Such as R&D,new Product Development,advertising,and