Business Studies

Nature & Significance

Easy

Shilpa Rai is a 37-year old entrepreneur who grew up in a rural district of South Kannada. She was very good at art and craft, particularly wax molds. She loved to make candles. Often she makes toys and small pieces of art with wax and uses them as a gift for her friends and relatives. She is always involved in helping poor women of the area by providing them with jobs after imparting necessary skills. She believes that she is getting her work done as well as helping the needy section of society. Since it is a small business, she performs all the functions of business management herself. But she knows that the workers are not from a sound background, and they need motivation to perform efficiently and effectively. Slowly, the business is growing noticeably as the number of orders is increasing. As the orders are increasing, the production cost is declining. Based on the knowledge and experience that Shilpa acquired in her business, she smartly handles all the critical situations.

"Slowly the business is growing as the number of orders are increasing, and the production cost is declining." Which of the following concept is causing the decrease in production cost here?

Economies of Sale

Economies of Production

Economies of Scope

Economies of Scale

✅ Correct Option: 4

Option 1 -> Economies of Sale is not a recognized economic concept and doesn't explain cost reduction with increased production volume.

Option 2 -> Economies of Production is a generic term but not the specific principle that describes declining costs as output increases.

Option 3 -> Economies of Scope refers to cost savings from producing multiple different products together, not from increasing volume of existing products.

Option 4 -> Economies of Scale occurs when increasing production volume leads to lower per-unit costs due to spreading fixed costs and operational efficiencies.

Hence, Option 4: Economies of Scale -> As the business grows and orders increase, fixed costs (machinery, rent, overhead) are distributed across more units, and the company benefits from bulk purchasing, better resource utilization, and improved efficiency. This results in declining production costs per unit, which is the fundamental principle of economies of scale. -> correct

Question 41

"She believes that she is getting her work done as well as helping the needy section of society." Identify the concept reflected in the above statement.

Question 42

"She is always involved in helping poor women of the area by providing them with jobs after imparting necessary skills". Which objective of management is reflected in this statement?

Question 43

"Based on the knowledge and experience that Shilpa acquired in her business, she smartly handles all the critical situations". This statement suggests that management is based on:

Question 44

"Since it is a small business, she performs all the functions of business management herself". Identify the functions of management performed by Shilpa in the above case.

"Slowly the business is growing as the number of orders are increasing, and the production cost is declining." Which of the following concept is causing the decrease in production cost here?

Solution

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CUET Business Studies Past Year Questions (Topic-Wise)