Question

Which of the following would suggest a firm has passed minimum efficient scale and therefore has diseconomies of scale?

A. The firm's machinery begins to break down more often.
B. The firm's cost per unit begins to go down.
C. The firm's transportation costs begin to go down because of the weight of the product.
D. The firm's product becomes too small for buyers to efficiently operate.

Answer 1

Diseconomies of scale occur when a firm becomes too large and experiences a rise in average costs as output and scale increase. Examples include increased machinery breakdowns, inefficient management, and high production costs.

Step-by-step explanation:

Diseconomies of scale occur when a firm becomes too large and experiences a rise in average costs as output and scale increase. This can happen when the firm becomes difficult to manage, leading to communication issues and disruptions in the flow of work and materials. Examples of diseconomies of scale include increased machinery breakdowns, inefficient management, and high production costs.