A statewide alliance of independent hospitals has formed in order to do group purchasing of medical supplies.Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered.This is an example of the advantage of __________ resulting from an alliance.
A) explicit collusion
B) economies of scale
C) opportunistic behavior
D) distribution opportunities

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that organizations obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. In this case, the alliance of hospitals is able to negotiate lower prices due to the large quantity of materials ordered, which is a classic example of economies of scale.

A Statewide Alliance of Independent Hospitals Has Formed in Order