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JAMB Economics 2014 Question 18

Question 18

Theory of Costs and Revenue

If the production cost of a large is higher firm than that of a small firm, it is experiencing

  1. A.internal economies of scale.
  2. B.internal diseconomies of scale.
  3. C.external economies of scale.
  4. D.external diseconomies of scale.
Show the answer and explanation

Answer: B (internal diseconomies of scale.)

Explanation

When a firm grows so big that its own costs rise (management problems, waste), it suffers internal diseconomies of scale.