A firm is considering changing its plant size.It calculates the amount of output it would be able to produce and the total cost for various plant sizes,as shown in the accompanying table.If the firm is currently using plant size C,the firm is experiencing which of the following?

Question

Quizplus · Accepted Answer

Diseconomies of scale occur when the cost per unit increases as the firm increases its output. In this case, when the firm moves from plant size C to plant size D, the total cost increases from $9,000 to $10,000 while only increasing output from 90 to 95 units. This indicates that the firm is experiencing diseconomies of scale. If the firm were experiencing economies of scale, the cost per unit would decrease as output increases. If the firm were experiencing constant returns to scale, the cost per unit would remain the same as output increases. Diminishing marginal product and increasing marginal product refer to changes in output as input increases, and are not applicable in this scenario.

A Firm Is Considering Changing Its Plant Size