Economies Of Scale MCQ Quiz

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Do you know about the economies of scale? You can take this quiz on economies of scale MCQ. Economies of scale are generally related to the cost advantages occurring to an enterprise or organization. Take this quiz to see how good is your understanding of this topic. We have got a set of questions where you can test your knowledge while learning new things. All the best! If you like the quiz and find it informative, so share it with others.

Questions and Answers

1.

'Economies of scale' is also known as
- A.
  
  Benefiting scales.
- B.
  
  Returns of scale
- C.
  
  EOS
- D.
  
  None of the above
Correct Answer
B. Returns of scale

Explanation
The correct answer is "Returns of scale". Economies of scale refers to the cost advantages that a company can achieve when it produces goods or services on a larger scale. As the scale of production increases, the average cost per unit decreases, leading to higher returns for the company. This concept is commonly known as returns of scale.

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2.

What is 'economies of scale'?
- A.
  
  The lower average cost of production
- B.
  
  Extra profit to gain
- C.
  
  Benefits of a business
- D.
  
  None of the above
Correct Answer
A. The lower average cost of production

Explanation
Economies of scale refer to the lower average cost of production. This concept suggests that as the scale of production increases, the average cost per unit decreases. This is because fixed costs, such as machinery and infrastructure, can be spread over a larger number of units, resulting in cost savings. By achieving economies of scale, businesses can increase their profitability by reducing their production costs and potentially gaining a competitive advantage in the market.

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3.

Which economies of scale involves specialization of departments?
- A.
  
  Specialization economies
- B.
  
  Managerial economies
- C.
  
  Departmental economies
- D.
  
  None of the above
Correct Answer
B. Managerial economies

Explanation
Managerial economies involve the specialization of departments within an organization. This means that different departments focus on specific tasks and functions, allowing them to become more efficient and productive in their respective areas. By specializing, departments can develop expertise and streamline their operations, leading to cost savings and improved overall performance. This type of economy of scale is particularly beneficial in large organizations where different departments handle various aspects of the business.

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4.

Monopsony economy is...
- A.
  
  Small business can get discounts from bulk purchase
- B.
  
  Medium sized business can get discounts from bulk purchase
- C.
  
  Large sized business can get discounts from bulk purchase
- D.
  
  All of the above
Correct Answer
C. Large sized business can get discounts from bulk purchase

Explanation
In a monopsony economy, there is only one buyer in the market. This means that large-sized businesses have a significant advantage as they have the purchasing power to buy in bulk, allowing them to negotiate for discounts from suppliers. Small and medium-sized businesses may not have the same bargaining power and may not be able to secure the same discounts. Therefore, the correct answer is that large-sized businesses can get discounts from bulk purchase.

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5.

Who benefits from risk-bearing economies?
- A.
  
  Conglomerate businesses
- B.
  
  Product development businesses
- C.
  
  Market development businesses
- D.
  
  All of the above
Correct Answer
A. Conglomerate businesses

Explanation
Conglomerate businesses benefit from risk-bearing economies because they have diversified portfolios of different businesses in various industries. This diversification allows them to spread the risks associated with individual businesses across their entire portfolio. If one business is facing financial difficulties or is underperforming, the conglomerate can rely on the profits generated by other businesses to offset the losses. This risk-sharing strategy helps conglomerates to mitigate the impact of economic downturns or industry-specific challenges, ultimately leading to more stable and sustainable growth.

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6.

What can businesses benefit from financial economies?
- A.
  
  High sum loan/Low interest rate
- B.
  
  Special services from banks
- C.
  
  Extension of deadline to pay back the bank
- D.
  
  None of the above
Correct Answer
A. High sum loan/Low interest rate

Explanation
Businesses can benefit from financial economies by obtaining a high sum loan with a low interest rate. This allows businesses to access a large amount of capital at a lower cost, enabling them to invest in growth opportunities, expand operations, or improve their financial position. By securing favorable loan terms, businesses can reduce their overall borrowing costs and increase their profitability. Additionally, a high sum loan provides businesses with the necessary funds to meet their financial needs and support their strategic objectives.

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7.

Diseconomies of scale can occur when a company becomes too big, lowering its production.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Diseconomies of scale refer to the situation when a company's size becomes too large, leading to inefficiencies and increased costs. As the company grows, coordination and communication become more challenging, leading to a decrease in productivity and an increase in costs. This can result in a decrease in production efficiency, which supports the statement that the answer is true.

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8.

Economies of scale occur when a company’s production stays at a constant rate without a curve, leading to lower fixed costs.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Economies of scale occur when a company’s production increases, leading to lower fixed costs.

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9.

External economies of scale are usually the cost savings available to the whole ________ as a result of its __________.
- A.
  
  Business, Location
- B.
  
  Industry, Size
- C.
  
  Industry, Location
- D.
  
  Business, Size
Correct Answer
C. Industry, Location

Explanation
External economies of scale refer to cost savings that are available to the entire industry as a result of its location. This means that when businesses in the same industry are located close to each other, they can benefit from shared infrastructure, specialized suppliers, a skilled labor pool, and knowledge spillovers. These factors can lead to lower costs of production and increased efficiency for all businesses in the industry. Therefore, the correct answer is "Industry, Location."

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10.

If a firm doubles its use of inputs and finds that output increases by 50%, then it has experienced
- A.
  
  Diseconomies of scale
- B.
  
  Economies of scale
- C.
  
  Growth
- D.
  
  Evolution
Correct Answer
A. Diseconomies of scale

Explanation
When a firm doubles its use of inputs and finds that output increases by only 50%, it indicates that the firm is experiencing diseconomies of scale. Diseconomies of scale occur when the firm's production costs increase at a faster rate than the increase in output. This can be due to factors such as inefficiencies, coordination problems, or a lack of economies in purchasing inputs in larger quantities. As a result, the firm's average cost per unit of output increases, leading to a decrease in profitability.

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Current Version
Aug 24, 2023

Quiz Edited by
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Mar 19, 2011

Quiz Created by
Vickilaw

Economies Of Scale MCQ Quiz

'Economies of scale' is also known as

What is 'economies of scale'?

Which economies of scale involves specialization of departments?

Monopsony economy is...

Who benefits from risk-bearing economies?

What can businesses benefit from financial economies?

Diseconomies of scale can occur when a company becomes too big, lowering its production.

Economies of scale occur when a company’s production stays at a constant rate without a curve, leading to lower fixed costs.

External economies of scale are usually the cost savings available to the whole ________ as a result of its __________.

If a firm doubles its use of inputs and finds that output increases by 50%, then it has experienced

External economies of scale are usually the cost savings available to the whole as a result of its __.