(a) What is an industry? (b) Explain the following: i. division of labor ii. economies of scale (c) Outline any four internal economies of scale.

Answer Details

(a) An industry is a group of companies that produce similar goods or services. Industries can be categorized based on the raw materials used, the production process, or the type of goods or services produced.

(b)

1. i. Division of labor refers to the specialization of tasks within a production process. In division of labor, different workers are assigned specific tasks to perform, which leads to increased efficiency and productivity.
2. ii. Economies of scale refer to the cost advantage that a company gains as it increases its production. As a company produces more, the cost of each unit decreases because fixed costs are spread over a larger number of units.

(c) Four internal economies of scale are:

1. 1. Technical economies of scale - These are achieved through the use of specialized machinery, improved production processes, and the optimization of resources.
2. 2. Managerial economies of scale - This refers to the benefits that come from having a larger, more centralized management team that can coordinate operations and make decisions more effectively.
3. 3. Financial economies of scale - Larger companies typically have access to more financing options, including lower-cost loans and the ability to issue bonds, which can lower their cost of capital.
4. 4. Marketing economies of scale - This refers to the benefits that come from having a larger marketing budget, which allows a company to reach more customers and increase its brand recognition.