Economies of size also suggest that bigger businesses use assets more efficiently than smaller ones.

• A. Bigger businesses use assets more efficiently than smaller ones
• B. Smaller businesses use assets more efficiently
• C. Asset efficiency is independent of size
• D. Only human resources efficiency improves with size

Answer: (A)

Economies of size describe how larger operations can spread fixed costs over more output and use capital more intensively, so assets are utilized more efficiently as a firm grows. When a business gets bigger, equipment and facilities can run closer to capacity, downtime drops relative to output, and overhead costs are spread over more units. All of these effects tend to increase asset turnover and lower the cost per unit, which means bigger firms generally use their assets more efficiently than smaller ones. The other statements don’t fit this idea: asset efficiency isn’t independent of size, and the improvement isn’t limited to human resources—assets themselves are the focus of economies of size.