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True or False quiz

  • /
  • Unit 1 - Intro to BM/
  • 1.5 Growth and evolution/
  • True or False quiz

Unit 1.5 - True or False quiz

To test your understanding of this topic (Growth and evolution), answer the following true or false questions.

No. StatementTrue or False?
1.When a business increases its size of operations and becomes more cost efficient, this is known as economies of scale.

True

2.Diseconomies of scale occur if a firm grows beyond its ability to operate efficiently.

True

3.Most businesses attempt to grow by reinvesting profits back into the business. This is a form of internal growth.

True

4.A large manufacturer of toilet rolls that takes over its competitor is an example of horizontal integration.

True

5.An operator of a national cinema chain that buys a film production studio is an example of vertical integration.

True

6.

Financial economies of scale mean that large firms can make cost savings by greater use of large-scale mechanical processes and specialist machinery.

False - this refers to technological economies

7.

Losing some control over the running of a business is a disadvantage for a franchisor.

True

8.When two businesses work together on a project for a finite period of time and create a separate business division or entity, this is known as a joint venture.

True

9.The ability of a large business to negotiate lower rates of interest on loans with commercial banks is an example of purchasing economies of scale.

False - this refers to financial economies

10.When a business grows very large, sometimes the production costs per unit can increase. This is known as diseconomies of scale.

True

11.Risk-bearing economies of scale, such as selling new products to new overseas markets is an example of external economies of scale.

False - this is an internal economy

12.In a franchise arrangement, the original business that developed the business idea and sells the right to others to use it is known as the franchisor.

True

13.Being unable to offer a more specialized and exclusive service to customers is a disadvantage of being a business that operates on a large scale .

True

14.Franchisees purchase the rights to use the franchisor’s name and business model in return for a fee and royalty payments.

True

15.External economies of scale occur when a firm’s average cost of production falls as the industry as a whole grows.

True

16.A strategic alliance occurs when two or more firms agree to commit resources to achieve an agreed set of goals without creating a new legal business entity.

True

17.When one business buys out another business to become a single but larger company, this is known as a merger.

False - this is a takeover or acquisition

18.The ability of a business to produce a larger product range and spread business risks across a bigger number of products is an example of a risk bearing economies of scale.

True

19.The ability of a business to use its larger size to negotiate better terms with suppliers is an example of purchasing economies of scale.

True

20.The ability of a business to use production techniques that smaller firms cannot use and to invest more in research and development (R&D) is an example of technical economies of scale.

True

Return to the Unit 1.5 - Growth and evolution homepage

Return to the Unit 1 - Introduction to Business Management homepage