This production strategy is suitable in situations where production processes have high fixed costs. (Select all that apply)

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BlackTom AI · Accepted Answer

First, consider the concept of fixed costs and how production strategies respond to them. 
Option 1: Economies of scale. When fixed costs are high, increasing output usually lowers the average cost per unit because fixed costs are spread over more units. This is the classic rationale behind economies of scale, so this option aligns with high fixed-cost scenarios. 
Option 2: A volume strategy. A volume strategy focuses on producing large quantities to amortize fixed costs and leverage high utilization of capacity. Given the emphasis on spreading fixed costs, this option also fits the described situation. 
Option 3: Economies of scope. Economies of scope occur when producing multiple products together reduces total costs due to shared inputs or processes. This is more about product mix efficiencies than simply reducing per-unit costs from high fixed costs, so it is not the primary fit for high fixed-cost production processes. It may apply in some multi-product contexts, but not as a direct response to high fixed costs alone. 
Option 4: A variety strategy. A variety strategy typically prioritizes offering many different products or features to meet diverse demand, which can actually increase complexity and fixed costs rather than reduce them. Therefore, it does not address the situation of high fixed costs in the production process and is not the best-suited approach here. 
In summary, the options that directly correspond to leveraging high fixed costs through larger output and spreading fixed costs over more units are economies of scale and a volume strategy. The other two options describe different strategic aims (diversity or multi-product considerations) that do not specifically address the high fixed-cost condition.

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This production strategy is suitable in situations where production processes have high fixed costs. (Select all that apply)

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