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JAMB Economics 1978 Question 5

Question 5

Business Organisations

The following is NOT a reason for the existence of small firms:

  1. A.scale of production is limited by size of market
  2. B.expansion brings diminishing returns
  3. C.large firms can cater for wide markets
  4. D.small firms can provide personal services
  5. E.all of the above.
Show the answer and explanation

Answer: C (large firms can cater for wide markets)

Explanation

Small firms survive because markets are small, growth brings diseconomies and they give personal service. The fact that large firms can serve wide markets is an argument for big firms, not small ones.