Economies of Scale and Specialization Quiz
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Questions and Answers

What is the main advantage of lumpy resources and activities?

  • They enable firms to spread costs over larger volumes of output (correct)
  • They promote task specialization and division of labor
  • They allow firms to offer specialized expertise across a broad range of know-how
  • They lead to lower costs as a percentage of sales for market leaders

    • How does increased scale contribute to greater task specialization?

  • By enabling firms to spread costs over larger volumes of output
  • By promoting learning and automation in knowledge-intensive industries
  • By breaking down the production process into separate tasks performed by specialized workers (correct)
  • By allowing firms to offer specialized expertise across a broad range of know-how

    • What is the basis of the experience curve in creating cost advantage?

  • Offering specialized expertise across a broad range of know-how
  • Learning-by-doing and repetition that develops individual skills and organizational routines (correct)
  • Division of labor and task specialization in knowledge-intensive industries
  • Spreading costs over larger volumes of output to achieve economies of scale

    • How did Intel achieve dominance in the world microprocessor market?

    <p>By accumulating learning in the design and manufacture of microprocessors</p> Signup and view all the answers

    What was a major factor leading to increased unit costs for Boeing during 2006–2011?

    <p>Overtime pay and premiums for night and weekend shifts</p> Signup and view all the answers

    During the 2008–2009 recession, what was essential for survival in hard-hit sectors such as house building, construction equipment, and retailing?

    <p>Fast response to declining demand</p> Signup and view all the answers

    What do residual efficiencies relate to, according to the text?

    <p>The firm's approach to reaching its efficiency frontier</p> Signup and view all the answers

    Where do excess costs have a tendency to accumulate within a firm, according to the text?

    <p>Corporate headquarters</p> Signup and view all the answers

    What impact does underutilization of plant capacity have on unit costs?

    <p>It increases unit costs because fixed costs must be spread over fewer units of production.</p> Signup and view all the answers

    How does pushing output beyond normal full capacity impact unit costs?

    <p>It increases unit costs due to underutilization of resources.</p> Signup and view all the answers

    In what way does ownership of low-cost sources of material offer a cost advantage?

    <p>It reduces fixed costs by providing discounts on raw materials.</p> Signup and view all the answers

    How does the hourly rate in Chinese auto assembly plants compare to that in the US?

    <p>It is lower, resulting in significantly reduced fixed costs compared to the US.</p> Signup and view all the answers

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