Why Do Firms Tend to Experience Decreasing Returns to Scale

question 57

Multiple Choice

Why do firms tend to experience decreasing returns to scale at high levels of output?

• A) Firms face more problems with coordinating tasks and communications among managers and workers at very high levels of output.
• B) Government tax policy tends to discourage large-scale production operations.
• C) Firms face fewer problems with inventory management and marketing as output reaches very high levels.
• D) Firms tend to use more capital and less labor at higher levels of output.

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Definitions:

Unemployment Rate

The quantity of jobless individuals in the labor force who are vigorously searching for employment.

Total Population

The entire number of people living in a particular area, region, or country.

Employed Number

Refers to the total number of individuals in a given country or region who are currently engaged in paid work.

Unemployment Rate Trend

The direction and pattern over time in the unemployment rate, indicating whether joblessness is increasing, decreasing, or remaining stable within an economy.