After The Revolution In Transportation, Factories Began To Grow In Size. A. True B. False

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Question

After the revolution in transportation, factories began to grow in size. a. True b. False

Answer

The correct answer is TRUE. The distribution function, which is part of the production process, became cheaper and quicker, and therefore much more efficient due to the revolution in transportation. Factory owners had already made large investments in order to buy the machinery and equipment for the production plant. They could now face a cheap price for transportation that would be the same cost per unit independently on the number of units produced and sold (or they could even get a discount for large quantities). Therefore, in order to recover the large investments, companies needed to sell outputs as large as possible in size. This scenario allowed the companies to experience economies of scale, to reduce the cost of production per unit sold in large exploitations, (due to the large fixed costs that were splitted into a larger number of units) and to earn greater profit margins per item sold.

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