Question

Suggest ways to reduce production costs for businesses

Is monopoly good or bad? justify your answer

Answer 1

A firm can increase their profit by reducing the cost of production. So it is important to develop the cost reduction procedures. A company identifies the various factors that drives the production cost high and built different strategies to deal with them.

Component cost :

​​​​​​The main cost of production will depend on the components that are using to produce that particular product. To reduce the production cost, it is better to reduce the cost of components that use to produce the final product. By substituting the low cost components that satisfies the requirements or buying bulk of components together, help to reduce the component cost. Hence it reduce overall production cost.

Change Suppliers:

All of the component suppliers will not consider the price reductions and they can't gave low cost substitutes. In such situations it is better to explore other suppling sources. Therefore , due to the competition among the suppliers they keep the prices low. It helps firm to reduce the cost of production.

Change Design:

​​​​​​Another important strategy to reduce the production cost is redesigning the product. The firm will already knows the features of it's product. So the firm can able to redesign the product by eliminating the unimportant features. It helps in reducing the production cost.

Employee Training :

When a company gave an effective training to their employees, it will helps in reducing the production cost. When a firm train their employees about how to reduce the cost and how to achieve progress, it made them to be a part of cost reduction.

​​​​​​Optimise with technology :

​​​​​​The improved technological strategies of a firm help to reduce the cost of production. The use of various latest technologies for the production will increase the efficiency and the consistency. Hence help in reducing the production cost

​​​​​​Monopoly having an bad impact on the economy. Monopoly is characterized by a single seller who selling a product that is unique in that market. In a monopoly market, the seller can sell his goods without having any competition because, there will not have an substitute for his product. A monopoly having an high potential to increase prices as their wish. This potential lead to negative effects on the customers includes restricting output on the market.