What is an economies of scale benefit often cited in integration?

• A. Economies of scale can be achieved as the business grows
• B. Costs rise with production
• C. It reduces the market share
• D. It makes the product more fragmented

Answer: (A)

Economies of scale arise when increasing output lowers the average cost per unit, and in integration this benefit is often cited because combining two firms can create a larger scale of operation. This allows fixed costs to be spread over more units, reducing cost per unit. It can also improve efficiency through centralized functions, bulk purchasing, better utilization of plants and equipment, and stronger bargaining power with suppliers and distributors. These effects collectively lower average costs and can boost profitability as the business grows.

The other statements describe costs that rise with production, a reduction in market share, or fragmentation of the product, none of which are benefits associated with integration.