Question

Big automobile companies like Honda and Nissan buy huge quantities of tires, so they end up paying far less per tire than ordinary consumers do. This is an example of:

Answer 1

This is an example of fixed costs spread for the supplier.

When automobile companies like Honda and Nissan buy huge quantities of tires, the tires suppliers can spread their fixed costs over a larger amount of tires, meaning that fixed costs per tire fall.

Fixed costs are those that do not depend on the level of production, for example, electricity or administrative costs.