In the coordination failure model, increasing returns to scale are best explained by strategic
A) mismanagement.
B) complementarities.
C) substitutabilities.
D) collusion.
E) government policy making.

Question

Quizplus · Accepted Answer

Increasing returns to scale occur when the output increases at a greater rate than the inputs due to synergies resulting from complementarities among the factors of production. This can lead to coordination failures as individual firms may not have the incentive to produce at an efficient scale without the coordination of other firms.

In the Coordination Failure Model, Increasing Returns to Scale Are