James opened a baseball manufacturing operation, and initially the more balls he made, the lower the per-unit cost. Now, as output expands, his per-unit costs are rising. He concludes that diseconomies of scale have set in. Is he correct? Why?

Since diseconomies of scale apply to the long run, this is probably an incorrect conclusion. Diminishing returns have set in. As James initially expanded output, he experienced falling average total costs because his marginal cost was less than his unit cost. Now his marginal cost is greater than unit cost, and he's operating on the upward-sloping portion of his short-run average total cost curve.