Edexcel A Level Business - Theme 3.2 Questions with Complete Solutions Rated to Pass

Economies of scale - The reductions in average costs enjoyed by a business as output increases Diseconomies of scale - Rising average costs as a business expands beyond its minimum efficient scale. Overtrading - occurs when a business attempts to expand too quickly without the sufficient resources to do so, usually by accepting too many orders, thus harming its cash flow position Internal economies of scale - The cost reductions enjoyed by a single business as it grows External economies of scale - The cost reductions available to all business as the industry grows Purchasing economies of scale - A reduction in unit costs as a result of buying in large quantities. Technical economies of scale - reductions in average costs of production due to the use of more advanced machinery. Managerial economies of scale - Reductions in average cost as a result of being able to employ specialist managers who are more productive Marketing economies of scale - Reductions in average cost as a result of being able to divide up marketing costs between multiple products or brands. Financial economies of scale - A situation where large firms are able to borrow money on better terms than smaller firms which makes the cost of financing investment and therefore unit costs lower. Risk-bearing economies of scale - The ability of large firms to spread the costs of uncertainty over a wider range of activities and therefore reduce their unit cost. Integration - The joining together of two businesses as a result of a merger or takeover