Economies of Scale, Diseconomies of Scale, and Constant Returns to Scale Question?

Question

In the long run, Martha Mowers can assemble 300 mowers per week at a total cost of $18,000, 400 mowers at a total cost of $24,000, or 500 mowers at a cost of $35,000.

For long-run output between 400 and 500 lawn mowers, Martha Mowers experiences:

A. Economies of scale

B. Constant returns to scale

C. Diseconomies of scale

Answer 1

well from 300 to 400 mowers, ATC is the same (constant returns to scale, 60, then to 400 to 500 there it goes to 60, up to 70.  So, the answer is C.

Answer 2

You are absolutely correct.

The correct answer is : C. Diseconomies of scale.

The increase in output is by 25 % from 400 to 500, but the increase in cost is by a larger percentage from $24,000 to $35,000 (if the cost had increased by 25%, it would habe gone up grom $24,000 to $30,000 only). Dis economies of scale resulted in proportionately higher increase in cost as compared to increase in the scale of output.