A Level Economics AQA Practice Exam

Which of the following is NOT a type of economies of scale?

1. Technical economies of scale

2. Managerial economies of scale

3. External economies of scale

4. Purchasing economies of scale

The correct answer is: External economies of scale

The correct answer is that external economies of scale are not a type of economies of scale in the same sense as the others listed. Technical economies of scale refer to the cost advantages that arise from the use of large-scale production techniques, which often enable firms to reduce the average cost per unit due to more efficient use of technology. Managerial economies of scale arise when larger firms can afford to hire specialized managers, leading to increased efficiency in their operations. Purchasing economies of scale occur when businesses purchase inputs in bulk, securing discounts and reducing the average cost of goods. External economies of scale, however, are not attributed to a single company’s operations but rather to the environment and market conditions surrounding an industry. These benefits arise from factors outside a firm’s control, such as improved infrastructure or a skilled labor pool developing in a particular area, which can benefit all firms in that region but do not represent the internal cost efficiencies characteristic of the other types.