Question

A large firm in the newspaper industry employs 250 people, of which 36 are upper-level managers. As a result of this employee-to-manager ratio, the firm experiences 14.4% reduced productivity. At the same time, a small firm with 65 employees and 4 upper-level managers experiences 6.2% reduced productivity.If everything else is constant, what can we say about the cost structure in this industry over this range of production?

Answer 1

Answer:

The firms in this industries have dis-economies of scale.

Explanation:

When firms have dis-economies of scale, they experience higher average cost (this means lower productivity) with a rise in the output.