Economies and Diseconomies of Scale
Presentation
•
Business
•
9th - 11th Grade
•
Medium
C Dyde
Used 54+ times
FREE Resource
5 Slides • 11 Questions
1
Economies and Diseconomies of Scale
NCFE Level 1/2 Business and Enterprise.
2
Multiple Choice
Economies of scale are those that
Generate lower unit costs for the Business
3
4
Economies of Scale
In short, Economies of Scale allow a business to take advantage of its size, driving the unit cost of making the item or providing the service lower. There are a number of Economies that Businesses can make use of, these are:
Purchasing Economies - Occurs when a Business buys goods in bulk and benefits from discounts
Technical Economies - Occurs when a business invests in new technology and is able to increase production
Marketing Economies - Occurs when a business grows and the average cost of advertising falls per unit, also the business can now advertise a brand rather than individual products
Financial Economies - Occurs when a large business can borrow money at a more favourable interest rate
Managerial Economies - Occurs when a large business can employ specialist managers
5
Multiple Choice
Large firms can negotiate better interest rates on loans; this reduces the costs of borrowing for larger companies. This is an example of
Financial economies of scale
Technical economies of scale
Managerial economies of scale
Marketing economies of scale
Risk bearing economies of scale
6
Multiple Choice
7
Multiple Choice
Which of the following is an advantage of division of labour?
Less job satisfaction
Delays in work
Increased speed of work
8
Multiple Choice
Large firms can afford to advertise and sell in larger quantities to develop brand loyalty. This is an example of
Purchasing economies of scale
Technical economies of scale
Managerial economies of scale
Marketing economies of scale
Risk bearing economies of scale
9
Multiple Choice
Large firms can buy raw materials in bulk at more favourable rates. This is an example of
Purchasing economies of scale
Technical economies of scale
Managerial economies of scale
Marketing economies of scale
Risk bearing economies of scale
10
Open Ended
In the UK, Cinema View PLC has four regional directors. In France, there is one regional director. Managers of each cinema report to their regional manager. Cinema View PLC advertises on television and on social media.
Explain two economies of scale that Cinema View PLC could benefit from if it increases in scale from 100 to 140 cinemas. (4)
11
These occur when a business grows so large that the cost per unit increase rather than decrease
Diseconomies of Scale
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13
Multiple Choice
14
Multiple Choice
Diseconomies of Scale result in a lower per unit production cost over the long run
True
False
15
Multiple Choice
Diseconomies of scale can be caused by
16
Open Ended
One of PP Arrow Ltd factories employees 100 workers and is spread across four buildings on a large site. One building has offices used by managers and supervisors. The three other buildings are used for production. The production process is broken down into three stages, with each stage in a different building Explain TWO diseconomies of scale that this factory is likely to experience [4]
Economies and Diseconomies of Scale
NCFE Level 1/2 Business and Enterprise.
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