Explain why some firms may suffer diseconomies of scale.
What will be an ideal response?
Diseconomies of scale exist when average costs increase with firm size. This can happen for several reasons. First, it is possible that input prices are increasing. If this is the case, then the average amount spent on inputs increases as the scale of production increases. Also, there may be coordination problems associated with an increasing number of layers of bureaucracy. If more layers of management lead to increased inefficiency, then the firm may experience diseconomies of scale.
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Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy?
A. 43.2 million B. 12.0 million C. 18.0 million D. 28.8 million
________ is an increase in the price level, while ________ is an increase in the price of one good in comparison to other goods and services.
A. Hyperinflation; inflation B. Inflation; hyperinflation C. Inflation; a relative price increase D. A relative price increase; inflation
The output of an American company, like Intel, in Ireland
A. is subtracted from the company's U.S. production for U.S. GDP calculations. B. counts in the Irish GDP. C. counts in the U.S. GDP. D. counts in both GDPs.
Which of the following is the main reason for externalities?
A) The full cost of a transaction is not borne by the buyer/seller of the product. B) Police enforcement of scalping is not uniformly enforced. C) the lack of organized exchanges for all goods and services D) The production of public goods uses up scarce resources.