Question 1
By 'diseconomies of scale' economists mean
◦ when unit costs increase as the scale of production increases.
◦ bureaucracy.
◦ indivisibilities.
◦ diminishing returns.
Question 2
External economies of scale may occur as
◦ the industry becomes larger.
◦ the firm becomes large and is able to get favourable terms from suppliers.
◦ the firm becomes larger and its industry becomes smaller.
◦ the firm becomes large and so gets the advantages of international trade.