When a firm becomes so large it is difficult to coordinate and control, it is most likely that
A) there are increasing marginal returns to increasing the firm's plant size.
B) average total cost begins to fall.
C) long-run average costs become negative.
D) economies of scale have begun.
E) diseconomies of scale have begun.

Question

Quizplus · Accepted Answer

When a firm becomes too large to coordinate and control, it is likely that it has surpassed the optimal scale of production and is experiencing diseconomies of scale. These can occur due to difficulties in communication, coordination, and management, leading to higher costs and reduced efficiency. This is the opposite of economies of scale, which occur when a firm benefits from increasing its scale of production up to a certain point.

When a Firm Becomes So Large It Is Difficult to Coordinate