Larger firms produce a product at larger average cost than s

Larger firms produce a product at larger average cost than small firms when:

A.economies of scope exist.

B.diseconomies of scale exist.

C.economies of scale exist.

D.cost complementarities exist.

Solution

Option (B).

Diseconomies of scale are at work when, with higher output, average cost per unit rises. So, large firms with higher production face larger average cost, than smaller firms with lower production level.