Which statement best describes diseconomies of scale?

• A. Average costs fall as output increases.
• B. Cost per unit rises as output rises.
• C. Fixed costs disappear as output grows.
• D. Production becomes more efficient with more output.

Answer: (B)

Diseconomies of scale occur when expanding production leads to higher average costs because managing a larger operation becomes more complex and inefficient. The statement "cost per unit rises as output rises" captures this idea directly: after a certain level of output, adding more units tends to raise, not lower, the cost per unit due to coordination problems, communication delays, overtime pay, and logistic complexities. In contrast, economies of scale describe costs falling as output increases, fixed costs don’t simply disappear with more output, and producing more often is not inherently more efficient if diseconomies are at play.