Edexcel IGCSE Business: Economies and diseconomies of scale, and production (4BS1) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover Topic 5, sections 5.1 and 5.2, in the Pearson Edexcel International GCSE in Business (4BS1) specification, Issue 2, February 2026. Use the study guide and revision notes first if you need them. Course links: the Edexcel IGCSE Business hub, the printable checklist and the free diagnostics. Every business is invented and money is in dollars. A calculator may be used.

Questions

1. Define internal economies of scale. [2]

2. Identify each situation as an internal economy of scale, an external economy of scale or a diseconomy of scale.

(i) A component maker opens beside a group of furniture firms, cutting every firm’s delivery costs. (ii) Brindle Biscuits buys a larger oven and its cost per biscuit falls. (iii) Brindle’s head office grows so large that decisions take weeks and cost per biscuit rises. [3]

3. Brindle Biscuits has these monthly total costs.

Output	1,000	3,000	6,000	8,000	10,000
Total cost	30,000	42,000	66,000	100,000	160,000

(a) Calculate average total cost at 3,000 and at 8,000 units. [2] (b) Identify the output with the lowest average total cost and state what the figures show beyond it. [2]

4. Explain one reason why the average total cost of a fast-growing business may begin to rise. [3]

5. Identify the production process used by each business.

(a) Corrigan Joinery builds one fitted wardrobe to each customer’s measurements. (b) Sellars Bakery bakes 300 rolls of one recipe, cleans down, then bakes 300 of another. (c) Penhallow Water fills and caps bottles on a line that runs all day. [3] (d) Explain one advantage to Penhallow of its process compared with Corrigan’s. [2]

6. Tamsin Tailors has 36 workers. It made 5,400 garments in a week. After a training programme, the same workers made 6,300 garments. Each worker is paid 500 a week.

(a) Calculate output per worker before and after the programme. [2] (b) Calculate the percentage increase in productivity. [2] (c) Calculate the labour cost per garment before and after, to 2 decimal places. [2]

7. Explain one benefit and one risk of just-in-time (JIT) for a bakery chain. [4]

8. Analyse how Kaizen could help a packing department use its resources effectively. [4]

9. Pellam Foods has labour costs of 48,000 and total costs of 90,000. Quimby Fabrics has labour costs of 20,000 and total costs of 95,000.

(a) Calculate labour cost as a percentage of total cost for each firm, to 1 decimal place. [2] (b) Identify which firm is labour intensive and justify your choice. [1] (c) Explain one impact on Pellam if it switched to capital intensive production. [2]

10. Nolan Components has 12 workers making 600 units a day. Each worker is paid 70 a day. It is considering robots. With robots, 4 workers would make 900 units a day, and the robots would cost 260 a day to run.

(a) Calculate output per worker now and with robots. [2] (b) Calculate labour and robot cost per unit now and with robots. [3] (c) Evaluate whether Nolan should introduce the robots. [5]

11. Dalvi Pottery has 8 employees and makes bowls one at a time to order, at a cost of 52 each. A hotel chain wants 400 identical bowls a month at 38 each. Batch production would cost 31 per bowl. Justify whether Dalvi should use batch production for this order. [6]

Answers

1. Falling average total costs [1] as the business’s output increases [1]. [2] Examiner insight: A definition that only says “costs fall when a firm gets bigger” is less precise; naming average total cost and output is what turns a loose idea into a definition.

2. (i) External economy [1]. (ii) Internal economy [1]. (iii) Diseconomy of scale [1]. [3] Examiner insight: Ask who caused the change: a firm’s own decision points to internal, an outside change points to external.

3. (a) 42,000 ÷ 3,000 = 14.00 [1]. 100,000 ÷ 8,000 = 12.50 [1]. [2] (b) The lowest is at 6,000 units (66,000 ÷ 6,000 = 11.00) [1]. Beyond it average cost rises (12.50, then 16.00), which shows diseconomies of scale [1]. [2] Examiner insight: Dividing total cost by output at every level is needed before you can name the lowest point; quoting total cost alone does not show the pattern.

4. Communication becomes slower as more layers of managers are added [1], so decisions are late and mistakes are repeated [1], which adds cost to each unit produced, so average total cost rises [1]. [3] Examiner insight: Any valid reason can score, but it must end with the effect on cost per unit; stopping at “it is hard to manage” leaves out the link.

5. (a) Job [1]. (b) Batch [1]. (c) Flow [1]. [3] (d) Flow gives a much lower cost per bottle at high output [1], so Penhallow can sell at a lower price than a business making each item to order [1]. [2] Examiner insight: Compare the two processes on the same point, here unit cost; a statement about flow alone does not answer a comparison.

6. (a) 5,400 ÷ 36 = 150 [1]; 6,300 ÷ 36 = 175 garments per worker [1]. [2] (b) (175 − 150) ÷ 150 × 100 [1] = 16.7% [1]. [2] (c) Wages 36 × 500 = 18,000. Before: 18,000 ÷ 5,400 = 3.33 [1]. After: 18,000 ÷ 6,300 = 2.86 [1]. [2] Examiner insight: Show the formula and divide by the original value for a percentage change; include the unit, such as garments per worker.

7. Benefit: stock is delivered only when needed [1], so less money is tied up in stock and less is wasted if it goes out of date [1]. Risk: a late delivery from a supplier [1] could stop baking and leave customers without products [1]. [4] Examiner insight: Each of the two named points needs its own development; two bare statements earn less than one benefit and one risk explained.

8. Kaizen means continuous improvement through many small suggestions from staff [1]. Packers might suggest firmer boxes or a better layout [1]. This cuts damaged goods and wasted materials and time [1], so each unit costs less, which protects profit [1]. [4] Examiner insight: Analysis is a chain of linked steps; give a specific change in the packing department rather than a general claim that Kaizen reduces waste.

9. (a) Pellam: 48,000 ÷ 90,000 × 100 = 53.3% [1]. Quenby: 20,000 ÷ 95,000 × 100 = 21.1% [1]. [2] (b) Pellam is labour intensive, because over half its costs are wages while Quenby’s labour share is much smaller [1]. [1] (c) Machines could replace workers, so output per worker rises [1], although it would need a large spending on equipment up front [1]. [2] Examiner insight: Support a labour-intensive label with both firms’ figures; the specification sets no cut-off, so a comparison is safer than a fixed rule.

10. (a) 600 ÷ 12 = 50 units [1]; 900 ÷ 4 = 225 units per worker [1]. [2] (b) Now: 12 × 70 = 840; 840 ÷ 600 = 1.40 [1]. With robots: 4 × 70 + 260 = 540 [1]; 540 ÷ 900 = 0.60 [1]. [3] (c) Cost per unit falls from 1.40 to 0.60 and productivity rises from 50 to 225 [1]. The robots’ purchase and installation cost is not included, so savings may take time to repay it [1]. Robots give consistent quality, though a fault could be repeated across many units [1]. They may be less flexible if customers want different products [1]. Judgement: if Nolan makes large volumes of similar units, introducing robots is probably right, since cost and productivity gains are large; if its products vary, the loss of flexibility matters more [1]. [5] Examiner insight: An evaluation scores on the decision and the reason given for it; weighing cost against flexibility for this firm matters more than listing every factor.

11. At 38 selling price and 31 batch cost, profit is 7 per bowl [1], which is 7 × 400 = 2,800 a month [1]. Producing the order by job production at 52 would lose 14 per bowl [1]. Against this, Dalvi would rely on one customer, and new equipment may be needed [1]. Dalvi could keep job production for individual customers and use batch only for the hotel order [1]. Judgement: batch production should be used for this order because it turns a loss into a profit, as long as the hotel order is regular [1]. [6] Examiner insight: Use the data in the stem, then weigh a risk against it before deciding; a justification that never mentions the figures stays general.

Where marks are usually lost

• Leaving out “average total cost” when defining economies of scale.
• Treating any cost increase as a diseconomy of scale.
• Mixing up internal and external economies.
• Not dividing total cost by output before comparing cost levels.
• Giving a production type without explaining its impact on cost, flexibility or quality.
• Using the new value instead of the old one for percentage change.
• Describing JIT or robotics with advantages only.
• Giving a verdict with no reason tied to the business in the stem.

Next steps

• Recap with the revision notes and the study guide.
• Course hub: Edexcel IGCSE Business and the printable checklist.
• Take the free diagnostics.
• Book a free trial class.

Frequently asked questions

What do these economies of scale and production questions cover? They follow Pearson Edexcel International GCSE Business (4BS1) sections 5.1 and 5.2: internal and external economies of scale, diseconomies of scale, job, batch and flow production, labour and capital intensity, productivity, lean production and robotics.

How should you define economies of scale? Include average total cost: economies of scale mean average total cost falls as output increases. Leaving out “average total cost” is a common reason for losing a definition mark.

Is any rise in costs a diseconomy of scale? No. A diseconomy of scale is a rise in average total cost caused by growth in output, not a rise caused by something else such as higher material prices.

How should you answer a question on robotics or JIT? Weigh advantages against disadvantages, such as the cost, breakdowns and loss of flexibility of robots or the supplier risk of JIT, and give a verdict tied to the business in the case.

Official syllabus

Pearson Edexcel International GCSE in Business (4BS1), Specification, Issue 2, February 2026, published by Pearson Education Limited. Topic 5: Business operations, sections 5.1 Economies and diseconomies of scale and 5.2 Production, all numbered points.