CMA Foundation · Fundamentals of Business Economics and Management · Theory of Production
A small software firm in Bengaluru grows and now uses a dedicated team of testers and a separate team of designers instead of every employee doing all tasks. The fall in cost per project is mainly due to which economy?
The cost saving is due to division of labour, or specialisation, which is an internal technical economy of scale. When employees concentrate on particular tasks such as testing or design, productivity rises and cost per project falls, without relying on outside industry developments.
- ADivision of labour (specialisation), a technical economyCorrect
- BFinancial economy
- CExternal economy of concentration
- DWelfare economy
Explanation
Splitting work into specialised roles raises productivity and lowers cost per project. This is division of labour, an internal technical economy. It is not financial, as no borrowing is involved, nor external, as it arises within the firm's own growth.
Did you get it right without looking?
One question tells you little. A timed set on Theory of Production shows your real accuracy, how long you take and where you lose marks.
More Theory of Production questions
- A bakery in Pune uses 1 oven and varies the number of workers. Total product (loaves per day) is: 1 worker 40; 2 workers 100; 3 workers 150;…
- A Coimbatore pump maker has a budget of Rs 12,000. Labour costs Rs 300 per unit and capital costs Rs 600 per unit. If the firm spends the wh…
- If the prices of both labour and capital double while the firm's total outlay stays unchanged, the isocost line will:
- In the long run, a firm moves through a stage of increasing returns to scale, then constant returns, and finally decreasing returns as it ex…
- Which of the following is an example of an internal diseconomy of scale rather than an external one?
- In the theory of production, which of the following is classified as a fixed factor in the short run for a garment manufacturer in Tiruppur?