RI Y5 H2 Econs Firms & Decisions Tutorial Answers 2023

RAFFLES

RAFFLES FIRMS AND DECISIONS –SECTION A1. Which of the following is likely to be fixed costs or variable costs for a chocolate factory over the course of a month?(a)The cost of cocoa. (b)An advertising campaign for a new chocolate bar. (c)The cost of electricity for running the mixing machines. d.Overtime pay. e.Wear and tear on wrapping machines.f.Interest on a mortgage for the factory: the rate of interest rises over the course of the month.

RAFFLES FIRMS AND DECISIONS – SECTION A2. For each of the following examples, (i) State if the economies of scale is internal or external (ii) Identify the type of internal/external economies of scale(a) Supermarkets such as Sheng Siong have larger bargaining power with suppliers.(b) Listed companies can finance their operations through public issue of shares.(c) Pharmaceutical firms make use of the talent pool and R&D infrastructure at Biopolis.

RAFFLES FIRMS AND DECISIONS – SECTION A2. For each of the following examples, (i) State if the economies of scale is internal or external (ii) Identify the type of internal/external economies of scale(a) Supermarkets such as Sheng Siong have larger bargaining power with suppliers.Marketing Economies of ScaleLarge scale buying and selling give the firm important savings in cost. Large firms havebargainingadvantageand are accorded a preferential treatment by their suppliers because they buy raw materials and componentsinbulk. This allows them todictatetheirrequirementswithregardtoprice, quality and delivery more effectively.

RAFFLES FIRMS AND DECISIONS – SECTION A(b) Listed companies can finance their operations through public issue of shares.Financial Economies of ScaleLarger firms are often givenlowerinterestratesand larger loans because of bettercreditratingsandgreatercollateral. In contrast, smaller firms, especially new startups or small and medium enterprises (SMEs), oftenfacehigherratesofinterestonloans because banks think it is riskier to lend to smaller companies. Large firms also tend to bepubliclimitedcompanies. Such firms canraisecapitalmoreeasily(cheaper) through the issuance of bonds (debt securities issued by borrowers such as firms seeking to raise funds from the financial markets) to the public. They are consequently better able to take advantage of financial economies of scale.

RAFFLES FIRMS AND DECISIONS – SECTION A 0.4-0.8% 0.5% 0.48-1.08% 0.35-0.45% 0.48-2.93%

RAFFLES 7

RAFFLES FIRMS AND DECISIONS – SECTION APharmaceutical firms make use of the talent pool and R&D infrastructure at Biopolis.Economies of Concentration / Agglomeration EconomiesAgglomeration economies may also result from theclusteringofbusinessesinadistinctgeographicallocatione.g. software inSiliconValleyin the State of California or Singapore’s twin hubs of biomedical and engineering research – Biopolis and Fusionopolis.•AvailabilityofSkilledLabour-When the demand for a particular type of skill is large enough, special educational institutions c