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CMA Foundation · Fundamentals of Business Economics and Management · Theory of Production

A large bank in Mumbai finds that raising funds through bulk deposits and bonds costs it less per rupee than a small co-operative bank pays. Which type of economy of scale is this?

This is a financial economy of scale. Large firms are seen as more creditworthy and can raise capital at a lower cost than small firms, which reduces their average cost of funds. It is not a technical or marketing economy.

  1. ATechnical economy
  2. BMarketing economy
  3. CFinancial economyCorrect
  4. DRisk-bearing economy

Explanation

Large firms can raise capital at cheaper rates and on easier terms because lenders view them as more creditworthy. This is a financial economy of scale. Technical economies relate to machinery and production methods, and marketing economies relate to bulk advertising and distribution.

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