PRC-3 · Chapter 12 · Question 24 of 69
A massive global corporation becomes so large that its internal communication breaks down, bureaucracy slows decisions, and managers lose control. Consequently, its Long-Run Average Cost (LRAC) starts to rise. This firm is experiencing:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Diseconomies of scale
Explanation
Diseconomies of scale occur when a firm grows too large, leading to management inefficiencies and communication breakdowns that cause the long-run average cost per unit to increase.
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