Which of the following is not a source of economies of scale?

Question

BlackTom AI · Accepted Answer

Economies of scale are cost advantages that arise as a firm increases its level of output: average cost per unit falls because fixed costs and certain variable costs are spread over more units and productive efficiencies improve.

Relevant concepts:
- Internal economies of scale: purchasing (bulk discounts), technical (better machinery/technology), managerial/labour (specialisation and division of labour) all reduce average costs as output rises.
- Diminishing returns (diminishing marginal product) is a short-run phenomenon: when one input increases while others are fixed, the additional output from each extra unit of that input eventually falls. That raises marginal and average costs, not lowers them.

Step-by-step reasoning:
1. Option a — Purchasing economies: Buying more inputs in bulk often secures per-unit discounts and lower transaction costs. This directly lowers average cost as output rises, so it is a source of economies of scale.
2. Option b — Ability to use improved technology: Larger firms can afford superior capital and automated processes that increase productivity and lower average cost (technical economies). This is a classic source of economies of scale.
3. Option c — Specialisation of the workforce: Division of labour increases labor productivity, reduces time per unit, and lowers average cost with higher output; another standard source.
4. Option d — Diminishing returns: This describes falling marginal productivity when an input is increased with others fixed. It increases marginal cost and is associated with the short run and potential diseconomies, not cost advantages from expanding scale.

No numerical calculations are required here.

Why the correct answer is correct: Diminishing returns works against falling average costs; it tends to raise costs as more of a variable input is used with fixed capacity. Therefore it is not a source of economies of scale.

Other options are incorrect because they are established mechanisms that reduce average cost as firms grow. Final answer: d. Diminishing returns.

Which of the following is not a source of economies of scale?单项选择题

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