Which one of the following illustrates internal economies of scale?
A firm expands its scale of production and is able to negotiate bulk-buying discounts on raw materials, reducing its average costs.
As an entire industry grows in a region, local colleges set up specialized courses, reducing recruitment costs for all firms.
A firm expands its workforce, resulting in communication breakdowns and an increase in its long-run average costs.
A firm reduces its output in the short run, causing its fixed costs to be spread over fewer units, increasing its average cost.
156 exam-style questions on AQA A Level Economics 1.4 Production, costs and revenue, covering 1.4.1 Production and productivity, 1.4.2 Specialisation, division of labour and exchange, 1.4.3 The law of diminishing returns and returns to scale (A-level only), 1.4.4 Costs of production, 1.4.5 Economies and diseconomies of scale, 1.4.6 Marginal, average and total revenue, 1.4.7 Profit, and 1.4.8 Technological change (A-level only). Each one has a worked solution and a mark scheme showing where the marks go.