A firm is operating at a scale where diseconomies of scale are present. Why is the firm NOT operating efficiently?
A) The firm is operating at a scale where total fixed costs are not minimized.
B) The firm is operating at a scale where the average total cost of production is falling as output expands.
C) The firm has grown so large that average total cost increases as output expands.
D) The firm is operating at a scale where average fixed costs are not as low as possible.

Question

Quizplus · Accepted Answer

Diseconomies of scale occur when the firm has grown so large that it becomes less efficient and average total cost increases as output expands. This means that the firm is no longer operating at the point where they can produce goods at the lowest possible cost.

A Firm Is Operating at a Scale Where Diseconomies of Scale