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QUESTION 6 Economies of scale exist in the oil tanker industry because A. Of the inherent safety...

Question:

QUESTION 6

Economies of scale exist in the oil tanker industry because

A. Of the inherent safety of the industry and the low risks involved.

B. Consolidation allows each firm to become more specialized.

C. Long-run average total costs are constant.

D. Short-run average total costs are declining.

E. Oil is a liquid and not a solid.

QUESTION 7

If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis, a line that slopes downward and to the right implies

A. Constant returns to scale.

B. Economies of scale.

C. Diseconomies of scale.

D. Inefficient use of capital.

E. Inefficient use of labor.

QUESTION 8

In the electricity generation industry, the cost per kilowatt hour of electricity declines as the capacity to generate output increases. This situation represents

A. A poor opportunity for investors.

B. Constant returns to scale.

C. Diseconomies of scale.

D. Economies of scale.

E. That electricity generation doesn?t harm the environment.

QUESTION 9

Which of the following would not be likely to result in diseconomies of scale?

A. Low worker morale

B. Low productivity

C. Administration overhead

D. Specialization of labor

E. Managerial problems

QUESTION 10

One reason cited for the many mergers in the oil, financial, and telecommunications industries in recent years is that

A. Bigger is better for its own sake.

B. These industries suffer from diseconomies

C. Merging allows the companies to take advantage of economies of scale

D. The children of CEOs have been marrying each other

E. Constant returns to scale exist in these industries

Industry

The industry refers to the group of firms that produces related goods and services in the economy. There are many types of industries out of which some industries give the price as given to the firms or some industries allow firms to make their own prices.

Answer and Explanation:

QUESTION 6

Economies of scale exist in the oil tanker industry because D. Short-run average total costs are declining .

It is because the economies of scale refer to a situation when the cost decreases as the output increases. It is the reason for the existence of economies of scale in the oil tanker industry.

QUESTION 7

If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis, a line that slopes downward and to the right implies B. Economies of scale .

It is because this curve enables the reducing cost of production as the level of output increases. The case on the graph is referred to as economies of scale.

QUESTION 8

In the electricity generation industry, the cost per kilowatt-hour of electricity declines as the capacity to generate output increases. This situation represents D. Economies of scale .

It is because of cost of generating output decreases as the output of electricity increases. It resembles the concept of economies of scale.

QUESTION 9

Which of the following would not be likely to result in diseconomies of scale D. Specialization of labor .

It is because specialization of labor reduces the cost of production and the productivity of output increases, it does not lead to the resemblance of the diseconomies of scale.

QUESTION 10

One reason cited for the many mergers in the oil, financial, and telecommunications industries in recent years is that C. Merging allows the companies to take advantage of economies of scale .

It is because a merger in these industries creates the advantageous outcomes which pose them to take advantage of the economies of scale.


Learn more about this topic:

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Industry Analysis for Business Plans

from Business Analysis Training

Chapter 4 / Lesson 6
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