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What Are Economies of Scale? - Definition & Impact on Fixed Costs Video

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Which of the following are economies of scale most dependent on?

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1. A state government offers tax breaks to companies to build factories in their state. If a company takes up this offer and builds a new factory in this state, what will they be reducing?

2. When foreign automakers achieve economies of scale by positioning plants in the United States to avoid tariffs, which kind of costs are they focused on reducing?

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About This Quiz & Worksheet

Using the concept of economies of scale can help a company save money on their fixed costs. The quiz will cover your understanding of the most important goal in achieving economies of scale; what costs are lowered when foreign automakers build plants in the U.S. to avoid tariffs; and what should be reduced for companies to achieve economy of scale after governments have offered them tax breaks.

Quiz & Worksheet Goals

In these assessments you'll be tested on:

  • The most important consideration in determining economy of scale
  • Why a company might be better off building many smaller plants, each producing a specific automobile model, than building one giant centralized plant
  • What should be reduced to achieve economies of scale

Skills Practiced

Use the quiz and worksheet to test your knowledge of the following:

  • Reading comprehension - ensure that you draw the most important information from the related lesson on economies of scale
  • Critical thinking - apply relevant concepts to examine information about tax break offerings in a different light
  • Knowledge application - use your knowledge to answer questions about the advantages of smaller, scattered factories

Additional Learning

To learn more about this topic, review the accompanying lesson titled What Are Economies of Scale? - Definition & Impact on Fixed Costs. This lesson covers the following objectives:

  • Learn how foreign car manufacturers gain incentives by using economies of scale to domestically produce popular car models
  • Identify the impact of an automaker's decision to slash fixed costs at its Rouge River plant
  • Know the differences between marginal costs and fixed costs
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