Which of the following is a managerial advantage of building a firm into a large organization?

• A. Ability to achieve economies of scale in management and production
• B. Decreased specialization among employees
• C. Lower bargaining power with suppliers
• D. Reduced access to financial markets

Answer: (A)

Verified step by step guidance

1. Understand the concept of managerial advantages in the context of firm size. Managerial advantages refer to benefits that arise from organizing and managing a firm more effectively as it grows larger.
2. Recall that economies of scale occur when increasing the scale of production or operation leads to a lower average cost per unit. In management, this means spreading fixed managerial costs over a larger output or benefiting from specialized management skills.
3. Analyze each option in terms of how it relates to firm size and management: for example, decreased specialization among employees is generally a disadvantage, not an advantage, as larger firms often increase specialization.
4. Consider bargaining power with suppliers: larger firms typically have higher bargaining power, so 'lower bargaining power' would not be a managerial advantage of a large firm.
5. Evaluate access to financial markets: larger firms usually have better access to financial markets, so 'reduced access' is not an advantage. Therefore, the ability to achieve economies of scale in management and production is the correct managerial advantage.