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Download Strategic Marketing 1st Edition Mooradian Test Bank all chapters
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Strategic Marketing (Mooradian/Matzler)
Note 11: Economies and Diseconomies of Scale
1) When Company X increases its production volume by 1%, the firm's total cost of production
increases by less than 1%. This is an example of ________.
A) diseconomies of scale
B) economies of scale
C) the supply chain
D) the value chain
Answer: B
Diff: 2 Page Ref: 135
2) According to economies of scale, each new unit that a company manufactures is ________.
A) more expensive to produce than the previous unit
B) less expensive to produce than the previous unit
C) less expensive to produce than the next unit
D) as expensive to produce as all other units
Answer: B
Diff: 2 Page Ref: 135
3) According to the text, ________ enable Coca-Cola to spend less advertising dollars per case
of soft drinks than Schweppes spends.
A) value chains
B) fixed output costs
C) economies of scale
D) market share strategies
Answer: C
Diff: 2 Page Ref: 135
5) All of the following are most likely characteristics of firms with economies of scale EXCEPT
________.
A) technology specialization
B) market segmentation
C) labor specialization
D) purchasing power
Answer: B
Diff: 2 Page Ref: 136
1
© 2012 Pearson Education, Inc. publishing as Prentice Hall
6) When Company X increases its production volume by 1%, the firm's total cost of production
increases by more than 1%. This is an example of ________.
A) experience curve effects
B) diseconomies of scale
C) economies of scale
D) inelasticity
Answer: B
Diff: 2 Page Ref: 136
7) Diseconomies of scale would most likely occur for all of the following reasons EXCEPT
________.
A) production volume exceeds capacity
B) size of firm too large to manage
C) employees lack motivation
D) technology too specialized
Answer: D
Diff: 3 Page Ref: 136-137
9) Ford and Toyota are most likely able to achieve economies of scale by ________.
A) increasing distribution distances
B) serving global market segments
C) segregating specialized workers
D) exceeding production capacities
Answer: B
Diff: 3 Page Ref: 135-136
10) Which of the following would most likely occur if a firm exceeded its optimal production
volume?
A) Unit costs would decrease with each additional unit.
B) Development costs would decrease unit costs.
C) Fixed costs would increase unit costs.
D) Unit costs would equal fixed costs.
Answer: C
Diff: 3 Page Ref: 135
AACSB: Analytic skills
2
© 2012 Pearson Education, Inc. publishing as Prentice Hall
11) Market leaders are typically less efficient than firms with lower share because larger firms
suffer from bureaucratic logistical issues.
Answer: FALSE
Diff: 2 Page Ref: 135
12) Walmart's purchasing power enables the firm to benefit from economies of scale and receive
volume discounts from suppliers.
Answer: TRUE
Diff: 1 Page Ref: 136
13) Dividing labor into specialized activities leads to diseconomies of scale because the resulting
organizational structure is too difficult to manage.
Answer: FALSE
Diff: 2 Page Ref: 136
14) What is economies of scale? How can a firm achieve economies of scale?
Answer: Economies of scale exist when each 1 percent increase in production volume results in
an increase of less than 1 percent in the total cost of production. Each new unit, therefore, is less
expensive to produce than the previous one. Firms are able to achieve economies of scale
through cost spreading, purchasing power, specialization of labor, and specialization of
technology.
Diff: 3 Page Ref: 135-136
AACSB: Analytic skills
3
© 2012 Pearson Education, Inc. publishing as Prentice Hall
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