Question

Does “downsizing” work well as a solution to diseconomies of scale?
a. Yes, always
b. No
c. Yes, sometimes
d. Only if marginal productivity is negative

2.Volume discounts on the purchase of raw materials, components, and inventory often create
a. diseconomies of scale
b. economies of scale
c. rising costs due to the Law of Diminishing Returns
d. a smaller MOS

3.The most important diseconomy of scale at the firm level is caused by or stems from
a. capital indivisibility
b. barriers to entry
c. congestion and bottleneck
d. the inability of management to effectively manage a large firm
e. the Law of Diminishing Returns

4.Large or significant economies of scale often creates
a. a significant barrier to entry
b. diseconomies of scale
c. a smaller MOS
d. the Law of Diminishing Returns

Answer 1

1) Answer is D. Only if marginal productivity is negative.

Decrease in output will make the productivity become positive because productivity first increases, then decreases and than become negative.

2) Answer is B Economies of scale.

It creates economies of scale because it reduces the cost of production.

3) Answer is D.

4) Answer is A. significant barrier to entry.

Because large economies means lower cost which keep away the new firms from industry because they can not have low cost and they have to have higher price due to higher cost. So they are not willing to enter the industry.

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