If a firm is experiencing diseconomies of scale, then
A) proportional increases in all inputs result in proportional increases in output.
B) the long-run average cost curve is rising as output expands.
C) the long-run average cost curve is decreasing as output expands.
D) the firm should expand the size of its operation.

Question

Quizplus · Accepted Answer

Diseconomies of scale occur when a firm's long-run average cost curve is rising as output expands. This means that as the firm grows larger, it becomes less efficient in its production and experiences higher costs. Therefore, option B is the correct answer. Option A is incorrect as proportional increases in all inputs do not result in proportional increases in output in the case of diseconomies of scale. Option C is also incorrect as the long-run average cost curve decreases as output expands in the case of economies of scale. Option D is not a viable solution since the firm is already experiencing higher costs, expanding operations further would only exacerbate the problem.

If a Firm Is Experiencing Diseconomies of Scale, Then