Why do firms tend to experience decreasing returns to scale at high levels of output?
A) Firms face more problems with coordinating tasks and communications among managers and workers at very high levels of output.
B) Government tax policy tends to discourage large-scale production operations.
C) Firms face fewer problems with inventory management and marketing as output reaches very high levels.
D) Firms tend to use more capital and less labor at higher levels of output.

Question

Quizplus · Accepted Answer

At very high levels of output, firms may face problems with coordinating tasks and communications among managers and workers, leading to decreasing returns to scale. This can result in inefficiencies and higher costs, which reduce the overall output and productivity of the firm.

Why Do Firms Tend to Experience Decreasing Returns to Scale