Diseconomies of scale arise primarily because

Diseconomies of scale arise primarily because: of the difficulties involved in managing and coordinating a large business enterprise. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital). firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available. the short-run average total cost curve rises when marginal product is increasing.

Answer

Option 1. of the difficulties involved in managing and coordinating a large business enterprise.

Explanation: Diseconomies of scale refers to the cost disadvantage when an output of a firm goes beyond a certain limit. In the case of diseconomies of scale, the average total cost increases. Firms face diseconomies of scale primarily because when firms grow larger, it becomes more and more difficult to manage and coordinate the entire business and achieve cost efficiency.

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