Multiple Choice
Which of the following graphs best represents a typical average total cost (ATC) curve in the short run for a firm?
10. The Costs of Production
Average Total Cost: Short Run and Long Run
Multiple Choice
What factors can create diseconomies of scale?
A
Increased coordination and communication problems, managerial inefficiencies, and bureaucratic costs as firm size grows.
B
Proportional increases in all inputs that keep average costs unchanged as output increases.
C
Bulk purchasing discounts, greater specialization, and more efficient capital use that lower per-unit costs.
D
Adoption of improved production techniques and automation that reduce marginal cost at larger scale.
Verified step by step guidance1
Understand the concept of diseconomies of scale: these occur when a firm's average costs increase as its output increases, typically due to inefficiencies that arise when the firm becomes too large.
Identify the internal factors that contribute to diseconomies of scale, such as increased coordination and communication problems within the organization as it grows.
Consider managerial inefficiencies that can happen when a firm expands, including difficulties in overseeing operations and slower decision-making processes.
Recognize bureaucratic costs, which refer to the additional administrative overhead and complexity that can increase costs as the firm size increases.
Contrast diseconomies of scale with economies of scale by noting that economies of scale involve factors like bulk purchasing discounts, specialization, and improved technology that reduce average costs, whereas diseconomies of scale involve the opposite effects.
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