CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
Which of the following is an internal economy of scale for a manufacturing company such as a Chennai auto-component maker?
Bulk purchase of raw materials at a discount is an internal economy of scale. It arises from the firm's own larger size and orders. Skilled labour pools, public transport links and nearby suppliers benefit the whole industry, so they are external economies.
- AGrowth of a skilled labour pool in the industrial area
- BBetter transport links built by the State Government near the cluster
- CBulk purchase of raw materials at a discount because of large ordersCorrect
- DDevelopment of a specialised component supplier nearby
Explanation
Internal economies arise from the firm's own expansion, such as discounts for bulk buying. The others (labour pool, government transport, nearby suppliers) benefit all firms in the industry or area and are external economies.
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