PRC-3 · Chapter 12 · Question 38 of 69
A multinational corporation grows so incredibly large that management loses control, internal communication breaks down, and extreme bureaucracy occurs. As a result, its long-run average cost per unit begins to rise. This describes:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Diseconomies of scale
Explanation
Diseconomies of scale happen when a firm becomes too large and inefficient, causing its long-run average costs to increase as output expands.
More Firm Theory MCQs
- Q40Which of the following is a classic example of a 'Variable Cost' in a commercial bakery?
- Q41In the first stage of the law of variable proportions, adding more workers allows them to divide tasks and specialize, making the factory…
- Q42A firm breaks even exactly, covering all its explicit accounting costs plus the opportunity cost of the entrepreneur's time and capital…
- Q43In an oligopoly, a firm assumes that if it lowers its price, rivals will match it, but if it raises its price, rivals will ignore it and…
- Q44A student buys a festival ticket online for Rs. 100. Upon arriving, he discovers parking costs an additional Rs. 10. In economic firm…