Which of the following statement is correct? Select one: a. Firms in labor-inten

Question

Which of the following statement is correct?

Select one:

a. Firms in labor-intensive industries with enormous production economies of scale may be forced to sell overseas in order to spread their overhead over a larger quantity of sales.

b. The unit cost reduction through high volume production is called the economies of scale.

c. All the answers are incorrect.

d. The multinational financial system enables companies to avoid exchange rate risk.

e. The distinguishing characteristic of the multinational corporation (MNC) is its emphasis on subsidiary performance.

Explanation / Answer

b. Economies of scale is all about proportionate cost savings due to increase in level of production. However since this company specific, it is also called internal economies of scale. But when there is a increase in scope of operations, all the companies in the same industry can benefit from the same and this is called external economies of scale.

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