When a Firm Grows Larger,many Additional Layers of Managers Are

question 16

Multiple Choice

When a firm grows larger,many additional layers of managers are sometimes added that do not actually produce any output.At the same time,the firm gains additional bargaining power over the prices it pays to its suppliers.If both of these factors have an equal effect,we would expect this firm to experience

• A) diminishing marginal returns.
• B) diseconomies of scale.
• C) constant returns to scale.
• D) economies of scale.
• E) increasing marginal returns.

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Definitions:

Price Ratio

The relative price of one good or service compared to another, often indicating how many units of one good can be exchanged for one unit of another.

Price

The monetary value anticipated, needed, or dispensed for acquiring something.

Utility Increases

A situation where the satisfaction or benefit derived from consuming goods or services rises.

Diminishing Marginal Utility

The principle that as more of a good or service is consumed, the additional satisfaction or utility gained from consuming an additional unit decreases.