Diseconomies of scale are present when
A)the LRAC curve slopes downward.
B)average total cost falls as input increases.
C)average total cost rises as output increases.
D)the LRAC curve is horizontal.
E)total fixed cost increases.

Question

Quizplus · Accepted Answer

Diseconomies of scale occur when an increase in output leads to an increase in average total cost (ATC). This can happen due to issues such as coordination problems, communication difficulties, and an increase in the complexity of operations. Thus, option C correctly identifies the presence of diseconomies of scale.

Diseconomies of Scale Are Present When