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Question
A large firm is able to buy its material requirements in large quantities (bulk buying) and this enables it to obtain preferential terms in the form of bulk discounts. It is ______________________.
A large firm is able to buy its material requirements in large quantities (bulk buying) and this enables it to obtain preferential terms in the form of bulk discounts. It is ______________________.
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Solution
The correct option is A purchasing economies
When a firm grows in size and expands operations it achieves internal economies of scale. These include financial economies, managerial economies, operational economies, purchasing economies, etc. due to the large scale of operations and the need for raw materials. The firms have the power to negotiate preferential terms from its suppliers to achieve cost advantages, this is termed as purchasing economies of scale.
When a firm grows in size and expands operations it achieves internal economies of scale. These include financial economies, managerial economies, operational economies, purchasing economies, etc. due to the large scale of operations and the need for raw materials. The firms have the power to negotiate preferential terms from its suppliers to achieve cost advantages, this is termed as purchasing economies of scale.
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