Which of the Following Is a Reason Why a Firm

question 61

Multiple Choice

Which of the following is a reason why a firm would experience diseconomies of scale?

• A)To finance an increase in the size of its plant, a firm must borrow more money or sell more shares of stock.
• B)As the size of the firm increases, it becomes more difficult to find markets where it doesn't already have operations.
• C)As the size of the firm increases, it becomes more difficult to coordinate the operations of its manufacturing plants.
• D)As the size of the firm increases, it must operate in other countries where differences in language, customs, and laws increase its average costs.

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Definitions:

Differential Analysis

A decision-making tool that examines the financial impact of alternative business decisions by focusing only on the relevant costs and benefits that differ between choices.

Fixed Factory Overhead

The consistent, non-variable expenses incurred by a manufacturing plant, which are required to maintain the production process but do not fluctuate with the level of output.

Operating Expense

Costs associated with the day-to-day running of a business, such as rent, utilities, and salaries, but excluding the cost of goods sold.

Normal Selling Price

The regular price at which a good or service is typically sold, excluding any discounts or promotional offers.