Which of the following is a potential cost of diversification?
A)Firms become bureaucratic and more expensive to manage as they grow.
B)The cost of production increases,thereby reducing profits earned by a firm.
C)The supply of labor reduces,thereby reducing the level of production.
D)Shareholders find it expensive and risky to hold a diversified portfolio.

Question

Quizplus · Accepted Answer

As firms diversify into new areas or businesses, their operations become more complex, and they may need to hire additional staff to manage the various functions. This can lead to increased bureaucracy and higher management costs, which can offset the benefits of diversification.

Which of the Following Is a Potential Cost of Diversification