Which of the following is an external factor causing diseconomies of scale?

• A. Duplication
• B. Motivation problems
• C. Congestion
• D. Poor communication

Answer: (C)

Diseconomies of scale that come from outside the firm arise when the wider environment becomes more crowded or strained as output grows. Congestion fits this idea because if many firms or high production concentrate in a location, roads, utilities, and services get overloaded, leading to delays, longer movements, higher rents, and inefficiencies that push up average costs for all firms in the area. The other options are internal inefficiencies within the firm—duplicating functions, motivation problems, and poor communication—which increase costs from within rather than from the surrounding environment. So congestion is the external factor that raises costs as scale increases.