In the following example, which firm is experiencing diseconomies of scale? Listed in the table are the long-run total costs for three different firms.Quantity 1 2 3 4 5 Firm A 100 100 100 100 100 Firm B 100 200 300 400 500 Firm C 100 300 600 1,000 1,500             Which firm is experiencing diseconomies of scale? Firm A only     Firm B only     Firm C only     Firm A and Firm B only   In the short run, a firm incurs fixed costs... a. only if it incurs variable costs b. only if it produces no output c. only if it produces a positive quantity of output d. whether it produces output or not

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The answer to this is that only Firm C is experiencing diseconomies of scale.

A diseconomy of scale occurs when a firm's per unit costs increase as the firm produces more and more of a given good or service.  Only Firm C fits this description.  Firm A has the same total costs for all levels of production.  Firm B's total costs are going up, but its per unit costs are not going up since it incurs a cost of $100 per unit at each level of output.  By contrast, Firm C's per unit costs do go up.  They go from $100/unit at one unit to $150/unit at two units and eventually as high as $300/unit at five units produced.

 

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