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?

Question

Gaven Rose

Business

4 September, 23:17

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?

+3

Answers (1)

Know the Answer?

Elliott Lynch · Answer 1

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.