Practice question · Sort into groups
Sort each source of falling average cost into its scale-economy driver.
Groups: Spreading fixed costs · Specialization · Purchasing power
- R&D spending serves every unit sold
- The same factory license covers double the output
- Bulk orders earn a 15% supplier discount
- Workers each master one station instead of all tasks
Hints
- Ask which force is actually doing the work in each case.
- Spreading a fixed cost is different from specialising the workforce.
Show the answer
Spreading fixed costs: The same factory license covers double the output, R&D spending serves every unit sold
Specialization: Workers each master one station instead of all tasks
Purchasing power: Bulk orders earn a 15% supplier discount
Why
Three engines of scale economies: dilute the fixed, divide the labor, and squeeze the suppliers.
Practise Cost Structures
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