The CEO of Zebra Networking thinks that an advantage of the company’s

QUESTION

The CEO of Zebra Networking thinks that an advantage of the company’s expansion into new markets is the additional profits due to economies of scale that the company will realize when selling to new markets.

Which of the following, if true, strengthens the CEO’s argument?
A) The company will sell enough units in foreign markets to make the endeavor profitable.
B) The company will not have to hire new employees or build additional production facilities to handle the greater output.
C) The number of customers for the company will greatly increase once it enters international markets.
D) The company will be able to sell its products internationally at prices that are higher than its domestic prices.
E) The cost of shipping its products internationally will be greater than shipping them domestically.

ANSWER

Answer: B
Explanation: B) An important economy of scale would result if current employees and facilities could produce larger quantities, thus lowering the per-unit cost of additional products. Choice A: Selling internationally might be profitable for reasons other than economies of scale. Choices C, D, and E all point to possible reasons that would not necessarily be accompanied by economies of scale.