Which size bookstore is more likely to experience diseconomies of scale?

• A. A medium-sized bookstore with moderate staff
• B. A very large bookstore with many employees and departments
• C. A bookstore operating at minimum efficient scale
• D. A small, independently owned bookstore

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of diseconomies of scale. Diseconomies of scale occur when a firm's long-run average costs increase as the firm increases its output or size. This typically happens due to inefficiencies that arise in very large organizations.
2. Step 2: Identify factors that cause diseconomies of scale, such as increased complexity in management, communication problems, and coordination difficulties among many employees and departments.
3. Step 3: Analyze the options given: a small bookstore, a medium-sized bookstore, a bookstore operating at minimum efficient scale, and a very large bookstore with many employees and departments.
4. Step 4: Recognize that a very large bookstore with many employees and departments is more prone to diseconomies of scale because the complexity and coordination costs increase significantly as the size grows beyond the efficient scale.
5. Step 5: Conclude that the very large bookstore is the most likely to experience diseconomies of scale, while smaller or medium-sized bookstores and those operating at minimum efficient scale are less likely to face these issues.