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What can cause a firm to experience decreasing returns to scale?

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Question

What can cause a firm to experience decreasing returns to scale?

Options

  • Bulk buying of inputs

  • Better specialisation

  • Problems of coordination and communication

  • Efficient use of machines

MCQ
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Solution

Problems of coordination and communication

Explanation:

Internal diseconomies like coordination problems and management difficulties can reduce efficiency, leading to decreasing returns to scale.

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