Podcast
Questions and Answers
What is meant by external diseconomies of scale?
What is meant by external diseconomies of scale?
- Reduced production costs due to increased output
- Improvement in infrastructure supporting business growth
- Increased unit cost of production due to industry expansion (correct)
- Lower raw material prices with higher production
Which of the following is a type of external diseconomies of scale related to natural resources?
Which of the following is a type of external diseconomies of scale related to natural resources?
- Increased pollution from larger production processes
- Increased regulation affecting production timelines
- Limited availability of raw materials driving costs up (correct)
- Enhanced infrastructure reducing delivery times
How can limited infrastructure result in external diseconomies of scale?
How can limited infrastructure result in external diseconomies of scale?
- By simplifying logistics and delivery mechanisms
- By boosting the speed of resource acquisition
- By lowering overall production efficiency
- By hampering delivery times and increasing costs (correct)
What impact can increased regulation have on businesses experiencing external diseconomies of scale?
What impact can increased regulation have on businesses experiencing external diseconomies of scale?
Which of the following best describes the concept of internal growth?
Which of the following best describes the concept of internal growth?
Flashcards
External diseconomies of scale
External diseconomies of scale
When a business's production costs rise because the entire industry is growing.
Limited natural resources (external diseconomies of scale)
Limited natural resources (external diseconomies of scale)
A situation where businesses in a growing industry face higher costs due to increased demand for limited natural resources.
Limited infrastructure (external diseconomies of scale)
Limited infrastructure (external diseconomies of scale)
A situation where businesses in a growing industry face higher costs due to increased traffic, congestion, and delays on shared infrastructure.
Increased regulation (external diseconomies of scale)
Increased regulation (external diseconomies of scale)
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Internal growth
Internal growth
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Study Notes
External Diseconomies of Scale
- External diseconomies of scale occur when the cost per unit of production increases for a business due to industry expansion.
- Factors contributing to external diseconomies of scale include:
- Limited natural resources: Increased industry output leads to higher demand for raw materials, impacting production costs.
- Limited infrastructure: Expanding industries use infrastructure more, potentially slowing deliveries and raising production costs.
- Increased regulation: Growing industries attract more government oversight, leading to potentially higher production costs due to stricter laws and regulations.
- Pollution: Environmental issues like droughts, floods, storms, and fires can harm natural resources and infrastructure, increasing costs associated with damage and repairs.
Internal Growth
- Internal (organic) growth refers to a business expanding using its own resources.
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