Which of the following is NOT a common source of economies of scale?

• A. Bulk purchasing of inputs
• B. Use of more efficient technology
• C. Increasing marginal costs due to congestion
• D. Specialization of labor and management

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of economies of scale. Economies of scale occur when increasing the scale of production leads to a lower average cost per unit. This means that as a firm produces more, it becomes more efficient and reduces costs.
2. Step 2: Identify common sources of economies of scale. These typically include bulk purchasing of inputs (which reduces input costs), use of more efficient technology (which improves productivity), and specialization of labor and management (which increases efficiency through division of tasks).
3. Step 3: Analyze the option 'Increasing marginal costs due to congestion.' Marginal cost is the cost of producing one more unit. Congestion typically causes inefficiencies and higher costs as production scales up, which is the opposite of economies of scale.
4. Step 4: Conclude that 'Increasing marginal costs due to congestion' is NOT a source of economies of scale because it leads to higher costs with increased production, representing diseconomies of scale instead.
5. Step 5: Summarize that the other options (bulk purchasing, efficient technology, and specialization) are all valid sources of economies of scale, while increasing marginal costs due to congestion is not.