Diseconomies of scale are caused by the law of diminishing marginal returns.

True or False?

False

Explanation:

The diseconomies of scale describe the phenomenon in which the increase in the company size causes an increase in the marginal cost of the output (good or service) and therefore in the average cost of production. They are much less known than the so-called "economies of scale" as they are less evident (sophisticated analytical accounting is required for their identification).

The causes:

-Cost of communication

-Duplication of efforts

-The weight of management

- "Office policies"

-Isolation of decision makers from the results of their decisions

-Low response time

- Inertia (reluctance to change)

-Auto-competition

-Great market shares

- Governmental opposition and public opinion