(a) Distinguish between small… | Economics

Question 1 Report

(a) Distinguish between small scale prodution and large scale production

(b) Describe any five internal economies of large scale production.

Answer

(a) Small-scale versus large-scale production.

Small-scale production	Large-scale production
Uses a small amount of capital.	Uses a large amount of capital.
Output produced is small.	Output produced is large (mass production).
Employs few workers with little division of labour.	Employs many workers with a high degree of division of labour.
Serves a small, local market.	Serves a large, wide (national or international) market.
Enjoys few or no economies of scale.	Enjoys substantial economies of scale.

(b) Five internal economies of large-scale production

Technical economies: the firm can use large, specialised and efficient machines, spreading their cost over a large output and lowering unit cost.
Managerial economies: it can employ specialist managers each in charge of one function, raising efficiency.
Financial economies: being large and reputable, it can borrow large sums easily and at lower interest rates.
Marketing (commercial) economies: it buys raw materials in bulk at discounts and sells in large quantities, reducing buying and selling costs per unit.
Risk-bearing economies: it can diversify its products and markets so that a loss in one area is offset by gains in another.

Answer Details

(a) Small-scale versus large-scale production.

Small-scale production	Large-scale production
Uses a small amount of capital.	Uses a large amount of capital.
Output produced is small.	Output produced is large (mass production).
Employs few workers with little division of labour.	Employs many workers with a high degree of division of labour.
Serves a small, local market.	Serves a large, wide (national or international) market.
Enjoys few or no economies of scale.	Enjoys substantial economies of scale.

(b) Five internal economies of large-scale production

Technical economies: the firm can use large, specialised and efficient machines, spreading their cost over a large output and lowering unit cost.
Managerial economies: it can employ specialist managers each in charge of one function, raising efficiency.
Financial economies: being large and reputable, it can borrow large sums easily and at lower interest rates.
Marketing (commercial) economies: it buys raw materials in bulk at discounts and sells in large quantities, reducing buying and selling costs per unit.
Risk-bearing economies: it can diversify its products and markets so that a loss in one area is offset by gains in another.

(a) Distinguish between small scale prodution and large scale production (b) Describe any five internal economies of large scale production.