Which term refers to economies of scale gained by negotiating lower interest rates with banks?

• A. Brand
• B. Financial Economies of Scale
• C. Product Range
• D. Technical Economies of Scale

Answer: (B)

When a business grows, it can borrow money more cheaply because banks see a larger, more established borrower as less risky and may offer lower interest rates. This reduces the cost of finance and lowers average costs per unit, which is known as financial economies of scale. So the term for economies of scale gained by negotiating lower interest rates with banks is financial economies of scale. The other options describe different kinds of advantages—branding for customer recognition, a wider product range for selling more, and technical improvements in production—but they don’t relate to the cost of borrowing.