Podcast
Questions and Answers
What is an external diseconomy of scale related to natural resources?
What is an external diseconomy of scale related to natural resources?
- Increased output requiring more raw materials (correct)
- Lower production costs due to resource availability
- Improved efficiency in resource utilization
- Decreased demand for raw materials
How can limited infrastructure affect production costs in a growing industry?
How can limited infrastructure affect production costs in a growing industry?
- By providing excess capacity for production
- By increasing costs due to slower deliveries (correct)
- By reducing delivery times and lowering costs
- By creating more efficient transportation options
What effect does increased regulation have on production costs for expanding industries?
What effect does increased regulation have on production costs for expanding industries?
- Regulatory relief reduces costs
- Less government attention decreases costs
- Regulations have no effect on production costs
- Higher regulations lead to increased costs of production (correct)
Which factor is NOT considered an external diseconomy of scale?
Which factor is NOT considered an external diseconomy of scale?
What is meant by internal (organic) growth in a business?
What is meant by internal (organic) growth in a business?
What is a consequence of limited natural resources for businesses in an expanding industry?
What is a consequence of limited natural resources for businesses in an expanding industry?
Internal growth refers to the expansion of a business using external resources.
Internal growth refers to the expansion of a business using external resources.
Name one type of external diseconomy of scale.
Name one type of external diseconomy of scale.
When businesses grow their output, they may face ______ due to increased industrial expansion.
When businesses grow their output, they may face ______ due to increased industrial expansion.
Match the following issues with their descriptions:
Match the following issues with their descriptions:
Flashcards
External Diseconomies of Scale
External Diseconomies of Scale
An increase in the cost of production for a single business, caused by the overall expansion of the entire industry it operates in.
Limited Natural Resources - External Diseconomies of Scale
Limited Natural Resources - External Diseconomies of Scale
When businesses in an expanding industry need more raw materials, driving up prices and raising costs for everyone.
Limited Infrastructure - External Diseconomies of Scale
Limited Infrastructure - External Diseconomies of Scale
When an industry grows, it puts more strain on shared infrastructure like roads and transport, making operations slower and more expensive.
Increased Regulation - External Diseconomies of Scale
Increased Regulation - External Diseconomies of Scale
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Internal Growth
Internal Growth
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Limited Natural Resources (External Diseconomy)
Limited Natural Resources (External Diseconomy)
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Limited Infrastructure (External Diseconomy)
Limited Infrastructure (External Diseconomy)
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Increased Regulation (External Diseconomy)
Increased Regulation (External Diseconomy)
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Study Notes
External Diseconomies of Scale
- External diseconomies of scale occur when industry growth increases the production costs for individual businesses.
- Factors contributing to external diseconomies include:
- Limited natural resources: Increased industry output demands more raw materials, potentially driving up prices.
- Limited infrastructure: Expanding industries use infrastructure more, slowing deliveries and increasing production costs.
- Increased regulation: Expanding industries attract greater government scrutiny, leading to more laws and higher compliance costs.
- Pollution: Natural disasters cause significant costs by damaging infrastructure and resources. This is distinct from industry-related pollution.
Internal Growth
- Internal (organic) growth is a business expansion supported by its own resources.
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