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Question 81Question →

Despite the competitive pressure from large departmental stores, small-scale convenience shops located in residential neighborhoods continue to operate successfully. Which of the following represents a primary operational advantage that enables these small-scale producers and traders to survive?

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Answer: Offering personal attention and maintaining flexible operating hours tailored to local customers

Answer

Providing personal attention and maintaining flexible operating hours tailored to local customers.
Small-scale enterprises survive competition from large firms because their intimate size allows owners to maintain personal contact with customers, adapt quickly to individual requests, and operate flexible hours convenient for the local community.

Step-by-Step Solution

1
Analyze the operational characteristics of small-scale business enterprises.
Identified key advantages including low capital requirements, direct owner contact with customers, flexibility, and localized service.
Small firms compete primarily on non-price factors like convenience and personal relations rather than economies of scale.
2
Evaluate the choices against small-scale scale of production principles.
Personal attention and flexible working hours directly explain small business survival against large-scale firms.
Large firms suffer from standardized, impersonal operations, creating a market niche for small firms.

Key Concept

Survival factors of small-scale enterprises
Question 82Question →

A large-scale garment manufacturing firm reduces its average cost per unit by purchasing raw materials in bulk at heavy discounts and negotiating lower freight rates for bulk transportation. Which specific internal economy of scale does this cost reduction represent?

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Answer: Commercial economies of scale

Answer

Commercial economies of scale
Commercial economies of scale occur when an enterprise leverages its large size to purchase inputs in bulk at discounted prices and secure preferential transport rates. Because these financial benefits are derived directly from the firm's commercial operations, this cost reduction represents a commercial economy of scale.

Step-by-Step Solution

1
Analyze the operational advantage described in the scenario.
The firm receives quantity discounts on raw materials and reduced transport tariffs due to large shipment volumes.
Identifying the mechanism of savings clarifies which category of internal economies of scale applies.
2
Classify the advantage within production economics.
Savings realized through buying, selling, and bulk freight negotiations are classified as commercial economies of scale.
Large firms use their market power to bargain for better trading terms, lowering overall unit costs.

Key Concept

Commercial Economies of Scale
Estimated Time:1m 0s
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