An airline industry study recently reported, “Evidence is abundant that larger firms are not more efficient or less costly simply because they are larger. In fact, other things equal, the largest carriers tend to have a higher level of unit costs, possibly caused by the difficulties of managing an airline of large size.” This means that
A. there are increasing returns to scale in the airline industry.
B. the airline industry has constant returns to scale.
C. the larger airlines are not profitable.
D. airlines are experiencing decreasing returns to scale.
Answer: D
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