| Line | Manufacturers have to do more than build large |
| manufacturing plants to realize economies of scale. | |
| It is true that as the capacity of a manufacturing | |
| operation rises, costs per unit of output fall as plant | |
| (5) | size approaches minimum efficient scale, where the |
| cost per unit of output reaches a minimum, | |
| determined roughly by the state of existing technology | |
| and size of the potential market. However, minimum | |
| efficient scale cannot be fully realized unless a steady | |
| (10) | throughput (the flow of materials through a plant) is |
| attained. The throughput needed to maintain the | |
| optimal scale of production requires careful | |
| coordination not only of the flow of goods through the | |
| production process, but also of the flow of input from | |
| (15) | suppliers and the flow of output to wholesalers and |
| final consumers. If throughput falls below a critical | |
| point, unit costs rise sharply and profits disappear. A | |
| manufacturers fixed costs and sunk costs (original | |
| capital investment in the physical plant) do not | |
| (20) | decrease when production declines due to inadequate |
| supplies of raw materials, problems on the factory | |
| floor, or inefficient sales networks. Consequently, | |
| potential economies of scale are based on the | |
| physical and engineering characteristics of the | |
| (25) | production facilities—that is, on tangible capital—but |
| realized economies of scale are operational and | |
| organizational, and depend on knowledge, skills, | |
| experience, and teamwork—that is, on organized | |
| human capabilities, or intangible capital. | |
| (30) | The importance of investing in intangible capital |
| becomes obvious when one looks at what happens in | |
| new capital-intensive manufacturing industries. Such | |
| industries are quickly dominated, not by the first firms | |
| to acquire technologically sophisticated plants of | |
| (35) | theoretically optimal size, but rather by the first to |
| exploit the full potential of such plants. Once some | |
| firms achieve this, a market becomes extremely hard | |
| to enter. Challengers must construct comparable | |
| plants and do so after the first movers have already | |
| (40) | worked out problems with suppliers or with new |
| production processes. Challengers must create | |
| distribution networks and marketing systems in | |
| markets where first movers have all the contacts and | |
| know-how. And challengers must recruit management | |
| (45) | teams to compete with those that have already |
| mastered these functional and strategic activities. |
Industry analysts said that the recent rise in fuel prices may be an early signal of the possibility of gasoline and heating oil prices staying higher than usually through the end of the year.
Certain groups of Asian snails include both “left-handed” and “right-handed” species, with shells coiling to the left and right, respectively. Some left-handed species have evolved from right-handed ones. Also, researchers found that snail-eating snakes in the same habitat have asymmetrical jaws, allowing them to grasp right-handed snail shells more easily. If these snakes ate more right-handed snails over time, this would have given left-handed snails an evolutionary advantage over right-handed snails, with the left-handed snails eventually becoming a new species. Thus, the snakes’ asymmetrical jaws probably helped drive the emergence of the left-handed snail species.
Which of the following would, if true, most strengthen the argument that asymmetrical snake jaws helped drive left-handed snail evolution?
In 1776 Adam Smith wrote that it is young people who have “the contempt of risk and the presumptuous hope of success” needed to found new businesses.