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Question
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.
Answer
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Related questions
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Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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