Asked by Changhao Zhang on Jun 26, 2024
Verified
Diseconomies of scale are also known as
A) Increasing returns to scale
B) Decreasing returns to scale
C) Constant returns to scale
D) None of the above
Diseconomies of Scale
The phenomenon where production costs per unit increase as a firm or operation grows in scale, opposite of economies of scale.
Returns to Scale
The change in output resulting from a proportionate increase in all inputs; the concept explains how output changes with varying levels of input.
- Examine the relationship among economies of scale, diseconomies of scale, and the trajectory of long-run cost curves.
Verified Answer
AP
Ankit PatelJul 02, 2024
Final Answer :
B
Explanation :
Diseconomies of scale refer to the point where the cost of production starts to increase as output increases. This is because as the scale of production increases, coordination and communication become more difficult, leading to inefficiencies and higher costs. This is in contrast to increasing returns to scale (A), where the cost per unit of output decreases as output increases due to economies of scale, and constant returns to scale (C), where the cost per unit of output remains constant as output increases. Option D is not a valid choice as it does not represent a correct answer.
Learning Objectives
- Examine the relationship among economies of scale, diseconomies of scale, and the trajectory of long-run cost curves.