(a) What is an industry?
(b) Explain the following:
i. division of labor
ii. economies of scale
(c) Outline any four internal economies of scale.
Explanation
(a) An industry is a group of related firms classified according to the type of goods and services produced OR it is a group of fims producing similar commodities or offering similar senvices.
(b) i. Division of labor is the breaking down of a production process into different stages such that each part is handled by a particular individual, unit, or department.
ii. Economies of scale are the internal and external cost-saving benefits that accrue to a firm as it expands in size.
(c) i. Marketing economies: Larger firms can buy inputs in bulk and enjoy discount and also employ an efficient and well organised marketing strategy and also afford to advertise more.
ii. Risk-bearing economies: Larger firms can diversify their products so that they will not suffer undulty if one line of production becomes unprofitable.
iii. Financial economies: larger firms can easily access loans from banks and other financial institutions at lower interest rates because they have collateral and are more credit worthy.
iv. Technical economies: As a firm expands the size, it can aftord advances technology and sophistiIcated plants and machinery, leading to increased output at a lower unit cost.
v. Managerial economies: Larger firms can employ well-qualified and competent personnel to supervise various departments.
vi. Welfare economies: Largerfims can provMde better packages foremploy ees to boost their morale, e.g. subsidised housing, canteen serices, etc.
vii. Research and developmemnt economies: Larger firms have the resources to set up their own research departments or units which promote innovation and inventions.