Question

Managerial economies of scale refer to:

A. The cost savings achieved through efficient production processes
B. The reduction in average costs achieved by producing a larger volume of goods
C. The benefits of specialized knowledge and skills within the organization's management
D. The advantages gained through access to favorable financial arrangements and lower interest rates

Answer 1

Managerial economies of scale are the cost benefits that arise from specialized management expertise within an organization. Broadly, economies of scale refer to reductions in average cost as output increases, particularly due to specialization and efficient production processes.

Step-by-step explanation:

Managerial economies of scale typically refer to the benefits of specialized knowledge and skills within an organization's management. However, the concept of economies of scale in general encompasses the idea that as the level of output increases, the average cost of producing each individual unit declines. This is evident in cases such as factories where high levels of production allow for specialized tasks and significant cost savings, leading to a lower average cost compared to smaller-scale production which has higher average costs. Specialization and efficient production processes contribute significantly to the economies of scale enjoyed by an organization.