Question

When a company purchases raw materials in bulk, thus reducing the cost of production, it is called:
O division of labor
O inventory control
O economies of scale
O mass production Thing

Answer 1

The company that purchases raw materials in bulk to reduce the cost of production is engaged in C. economies of scale.

What are economies of scale?

Economies of scale are the cost advantages that the company can reap by increasing its scale of operation.  The cost advantages arise from economies of scale through the following ways:

• Improved purchasing power
• Managerial efficiency
• Technological innovations
• Unique resources
• External resources.

Thus, when a company purchases raw materials in bulk to reduce cost, it is not a division of labor, inventory control, or mass production, but it is enjoying C. economies of scale.

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