Darrell owns a furniture store. If he moves into a larger store but finds that his average costs have increased in the long run, we know that Darrell is experiencing:

Question

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When a business moves to a larger scale, it is expected to experience economies of scale, where the average costs decrease due to increased efficiency. However, if the average costs increase in the long run, it indicates that the business is facing diseconomies of scale, which may be due to factors such as communication problems or increased bureaucracy.

Darrell Owns a Furniture Store