CA Foundation P4 · Chapter 3 · Question 14 of 15
Savings arising from the use of larger and more specialised machinery as a firm expands its scale are an example of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Internal technical economies of scale
Explanation
Internal economies arise within the firm as it grows; technical economies stem from indivisible, specialised and larger machines that lower cost per unit. External economies accrue to all firms from the growth of the industry, and economies of scope come from producing several products together.
More Theory of Production and Cost MCQs
- Q1A production function expresses:
- Q2Under the law of variable proportions, a rational producer will operate in:
- Q3Total product of labour (with fixed capital) is as follows: 1 worker: 10 units; 2 workers: 24; 3 workers: 36; 4 workers: 44; 5 workers…
- Q4If all inputs are doubled and output increases three times, the firm is experiencing:
- Q5For the Cobb-Douglas production function Q = A L^0.6 K^0.5, returns to scale are: