Final answer:
The main answer is that large firms do not dominate the market for good A due to diseconomies of scale increasing the average total cost (ATC) for large firms compared to smaller firms, making them less competitive and less profitable.
Step-by-step explanation:
If the production of good A exhibits diseconomies of scale, this suggests that as a firm grows larger and production levels increase, average costs also rise. This rise in costs is due to factors like management difficulties, communication breakdowns, and disruptions in the workflow. In such a scenario, large firms experience a higher average total cost (ATC) compared to smaller firms.For good A, as large firms scale up production, the diseconomies of scale cause their ATC to be greater than that of small firms. This higher ATC for larger firms makes them less competitive, as smaller firms can operate at lower costs. Therefore, option A is the main answer Since the production of good A exhibits diseconomies of scale, the ATC of large firms is greater than the ATC of small firms, deterring the market for good A from being dominated by large firms.The explanation for this includes the inefficiencies associated with overly large production scales, which result in higher costs and make larger firms less competitive over time. In real-world markets, too-large factories are rare due to their inability to compete against more efficient producers. Options B and C are incorrect because diseconomies of scale lead to higher costs and reduced profitability for large firms, and not the reverse.In conclusion, diseconomies of scale lead to a situation where smaller firms may hold a cost advantage over larger firms in the market for good A, resulting in a market that is not dominated by large firms.