The coordination failure model is based on the possibility of increasing returns to scale
A) both at the aggregate level and at the level of the individual firm.
B) at the aggregate level, but not at the level of the individual firm.
C) at the level of the individual firm, but not at the aggregate level.
D) in future periods, but not in the current period.

Question

Quizplus · Accepted Answer

The coordination failure model suggests that there may be increasing returns to scale at the aggregate level, but not necessarily at the level of the individual firm. The model suggests that coordination among firms is necessary to achieve higher levels of production and efficiency, but without coordination, firms may remain small and inefficient, leading to a suboptimal outcome at the aggregate level. Therefore, the answer is B, as the increasing returns to scale are only present at the aggregate level, not at the individual firm level.

The Coordination Failure Model Is Based on the Possibility of Increasing