Question

If Temper Company, a manufacturer of mattresses, was considering moving its production facilities to China but decided against it because the additional costs of shipping the mattresses back to the U.S. would offset the cost savings associated with moving the production facilities, the increased costs associated with shipping would be an example of A) learning-curve economies. B) diseconomies of scale. C) economies of scale. D) competitive advantages.

Answer 1

The correct answer is letter "B": diseconomies of scale.

Step-by-step explanation:

Diseconomies of scale is a point where a business no longer experiences a reduction in cost per unit of output. Instead, after this point, the cost per unit tends to increase.

A number of factors contribute to diseconomies of scale. For example, if a manufacturing process involves multiple steps, there may be a volume level that creates a neck bottle for a single process. Shipping can also lead to diseconomies of scale.

Answer 2

B. diseconomies of scale

Step-by-step explanation:

Diseconomies of scale occurs when expansion of output is associated with increasing average unit cost. It follows that when production output is increased, marginal cost rises, which results in reduction in profitability. In this case, temper saw that expansion of output would lead to diseconomies of scale due to increases in the costs that would be associated with shipping back to the United states.