A car leasing company that expands its size by buying its competitors may run the risk of increasing production cost per unit due to:

Question

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When a company expands its size by acquiring its competitors, it may suffer from diseconomies of scale where production costs increase with the increase in size. This can happen when the management fails to coordinate and control the operations efficiently, leading to duplication of efforts, increased bureaucracy, and communication problems. Eventually, the additional costs incurred due to these inefficiencies offset the benefits gained from economies of scale, resulting in a higher production cost per unit.

A Car Leasing Company That Expands Its Size by Buying