Diseconomies of scale from managerial inefficiencies

Steps:

• Define diseconomies of scale as rising average costs when production expands beyond optimal levels.
• Identify causes like coordination problems in large firms leading to higher per-unit expenses.
• Evaluate options for links to scale-driven cost increases.
• Select the option directly tied to internal firm growth issues.

Why A is correct:

• Diseconomies of scale occur when firm expansion causes bureaucratic overload, increasing administration costs per unit as defined in production theory.

Why the others are wrong:

• B: Raw materials costs rise from market factors, not firm size.
• C: Taxation on profits affects net income uniformly, unrelated to scale.
• D: Minimum wage hikes impact labor costs industry-wide, not from scaling production.

Final answer: A