4.1.4.5 Economies and diseconomies of scale Quiz: AQA Economics, Unit 1

The 20 questions

1. What term describes falling long-run average costs as output increases?

   • Diseconomies of scale
   • Minimum efficient scale
   • Economies of scale
   • Diminishing returns

2. Which of the following is an example of an internal economy of scale?

   • Bulk buying discounts
   • Shared local infrastructure
   • Industry research centres
   • Skilled local labour

3. Which of the following is an example of an external economy of scale?

   • Bulk purchasing discounts
   • Skilled labour pool
   • Managerial specialisation
   • Financial economies

4. Which issue causes internal diseconomies of scale as a firm expands?

   • Poor communication
   • Lower interest rates
   • Specialisation of labour
   • Bulk buying discounts

5. What happens to long-run average cost when a firm experiences increasing returns to scale?

   • It falls
   • It stays constant
   • It rises
   • It equals revenue

6. What is defined as the lowest level of output where long-run average cost is minimised?

   • Marginal cost
   • Maximum capacity
   • Profit-maximising output
   • Minimum efficient scale

7. If minimum efficient scale is a large percentage of market demand, what market structure develops?

   • Monopolistic competition
   • Fragmented market
   • Oligopoly
   • Perfect competition

8. What happens to average cost beyond minimum efficient scale on an L-shaped LRAC curve?

   • It equals zero
   • It remains constant
   • It increases sharply
   • It falls rapidly

9. What principal factor causes long-run average costs to rise for very large firms?

   • Management co-ordination failure
   • Financial risk spread
   • Purchasing power
   • Technical efficiency

10. A firm's average cost falls from £20 to £12 as output grows. What does this illustrate?

    • External diseconomies
    • Economies of scale
    • Diminishing marginal returns
    • Diseconomies of scale

11. Which scenario provides an example of a financial economy of scale?

    • Lower interest rates
    • Bulk purchasing discounts
    • Specialist manager hiring
    • Shared local infrastructure

12. Which option represents an example of a technical economy of scale?

    • Bulk ordering discounts
    • Using larger machinery
    • Local skilled labour
    • Cheaper bank loans

13. What causes external economies of scale to occur for a firm?

    • Growth of firm
    • Higher tax rates
    • Growth of industry
    • Internal restructuring

14. What primary benefit do consumers gain from a firm's internal economies of scale?

    • Lower prices
    • More advertising
    • Higher wages
    • Larger dividends

15. At which point on a U-shaped long-run average cost curve is the minimum efficient scale?

    • Maximum point
    • Lowest point
    • Origin point
    • Inflection point

16. What characteristic of large-scale production creates high entry barriers for new firms?

    • Low fixed costs
    • High initial output
    • High variable costs
    • Low market share

17. What type of diseconomies of scale might cause a large firm to break up into smaller divisions?

    • Communication breakdown
    • Bulk buying losses
    • External shocks
    • Transport costs

18. What typical shape does a standard long-run average cost curve take?

    • Horizontal
    • V-shaped
    • S-shaped
    • U-shaped

19. A firm reduces unit costs by buying raw materials in bulk. What type of economy is this?

    • Purchasing
    • Managerial
    • Technical
    • Financial

20. What causes a firm's long-run average costs to rise as output increases?

    • Economies of scale
    • Diseconomies of scale
    • External economies
    • Diminishing returns

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