Suppose that Gigantic Company is increasing in size. As Gigantic Company grows, demand for inputs causes input prices to rise. It is likely that continued growth will result in
A) economies of scale.
B) reduced fixed costs.
C) diseconomies of scale.
D) increasing marginal returns.

Question

Quizplus · Accepted Answer

As input prices rise with the growth of Gigantic Company, it will likely experience diseconomies of scale where the cost per unit of output increases, offsetting any potential advantages of increasing production. This can be due to factors such as increased complexity, communication difficulties, and managerial inefficiencies that arise as the size of the firm grows.

Suppose That Gigantic Company Is Increasing in Size