How can businesses lower costs?

How can businesses lower costs?

• A. Use technology; lower labour costs; achieve Economies of Scale
• B. Increase advertising; expand product line
• C. Hire more staff; raise wages
• D. Outsource only domestically

Answer: (A)

Lowering costs comes from boosting efficiency and spreading fixed costs over more units. Using technology can automate tasks, speed up production, and reduce the need for manual labour, which lowers labour costs and increases output. As production volume grows, fixed costs are spread over more units, and buying inputs in larger quantities or organizing production more efficiently can further reduce the average cost per unit—that’s economies of scale. These ideas together directly cut costs per unit. The other options tend to raise costs or limit savings: increasing advertising and expanding the product line adds to expenses; hiring more staff and paying higher wages increases ongoing costs unless productivity rises enough to offset them; outsourcing domestically restricts access to potentially cheaper global options and bigger scale benefits.

Lowering costs comes from boosting efficiency and spreading fixed costs over more units. Using technology can automate tasks, speed up production, and reduce the need for manual labour, which lowers labour costs and increases output. As production volume grows, fixed costs are spread over more units, and buying inputs in larger quantities or organizing production more efficiently can further reduce the average cost per unit—that’s economies of scale. These ideas together directly cut costs per unit.

The other options tend to raise costs or limit savings: increasing advertising and expanding the product line adds to expenses; hiring more staff and paying higher wages increases ongoing costs unless productivity rises enough to offset them; outsourcing domestically restricts access to potentially cheaper global options and bigger scale benefits.