Question

The following is a list of various types of economies of scale:

1. The firm can benefit from the specialization and division of labour.
2. It can overcome the problem of indivisibilities.
3. It can obtain inputs at a lower prices.
4. Large containers/machines have a great capacity relative to their surface area.
5. The firm may be able to obtain finance at lower cost.
6. It becomes economical to sell by-products.
7. Production can take place in integrated plants.
8. Risks can be spread with a larger number of products or plants.

Match each of the following examples for a particular firm to one of these types of economy of scale.

(A) Delivery vans can carry full loads to single destinations.
(B) It can more easily make a public issue of shares.
(C) It can diversify into other markets.
(D) Workers spend less time having to train for a wide variety of different tasks, and less time moving from task to task.
(E) It negotiates bulk discount with a supplier of raw materials.
(F) It uses large warehouses to store its raw material and finished goods.
(G) A clothing manufacturer does a deal to supply a soft toy manufacturer with offcuts for stuffing toys.
(H) Conveyor belts transfer the product through several stages of the manufacturing process.

Answer 1

Matching examples with Economies of scale

Example	Economies of Scales
(A) Delivery vans can carry full loads to single destinations.	2. It can overcome the problem of indivisibilities.
(B) It can more easily make a public issue of shares.	5. The firm may be able to obtain finance at lower cost.
(C) It can diversify into other markets.	8. Risks can be spread with a larger number of products or plants.
(D) Workers spend less time having to train for a wide variety of different tasks, and less time moving from task to task.	1.The firm can benefit from the specialization and division of labour.
(E) It negotiates bulk discount with a supplier of raw materials.	3.It can obtain inputs at a lower prices.
(F) It uses large warehouses to store its raw material and finished goods.	4. Large containers/machines have a great capacity relative to their surface area.
(G) A clothing manufacturer does a deal to supply a soft toy manufacturer with offcuts for stuffing toys.	6. It becomes economical to sell by-products.
(H) Conveyor belts transfer the product through several stages of the manufacturing process.	7. Production can take place in integrated plants.