Suppose that Gigantic Company is increasing in size. As Gigantic Company grows, coordination of work teams is becoming more difficult because of increased bureaucracy. It is likely that continued growth will result in
A) economies of scale.
B) Gigantic Company achieving the minimum efficient scale of production.
C) diseconomies of scale.
D) increasing marginal returns.

Question

Quizplus · Accepted Answer

As Gigantic Company grows and becomes more bureaucratic, coordination of work teams becomes more difficult, leading to inefficiencies and higher costs. This is a classic example of diseconomies of scale, where the costs of production increase as the firm grows beyond a certain point. Thus, continued growth will likely result in diseconomies of scale.

Suppose That Gigantic Company Is Increasing in Size