Question

Support and commercial services (ancillary firms) as a form of external 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 gained by an industry as a whole through the presence of supporting firms and services
D. The advantages of specialized knowledge and skills within the organization

Answer 1

Support and commercial services (ancillary firms) as a form of external economies of scale reference the overall benefits an industry gains from a network of supporting firms, which help reduce average costs and increase industrial efficiency.

Step-by-step explanation:

Support and commercial services (ancillary firms) as a form of external economies of scale refer to C. the benefits gained by an industry as a whole through the presence of supporting firms and services. This concept highlights how industries can reduce average costs and increase efficiency when they have access to a network of specialized service providers and firms that support the main production process. These ancillary firms can include providers of materials, components, and services that are essential for the primary industry to operate effectively and competitively.

For instance, warehouse stores like Costco or Walmart benefit significantly from economies of scale, operating larger facilities that can produce goods at lower average costs compared to smaller outlets. These economies of scale arise not only from the size and scale of production but also from the external support and services that these firms rely on, which similarly grow and become more efficient as the industry expands.