Which of the following is NOT an internal dis-economy of scales?

Analyze the question: We need the option that is NOT an internal diseconomy of scale. Internal diseconomies are disadvantages a firm suffers from within itself when it grows too large, causing average cost to rise.

Concept:

• Internal economies of scale are advantages of large-scale production (cheaper bulk buying, specialisation, easier management, access to credit).
• Internal diseconomies of scale are the problems of being too big (poor coordination, bureaucracy, low morale, slow decisions).

Check each option:

• A. Easy management and less administrative cost. This is a benefit. Large firms can hire specialised managers and spread administrative costs over a large output. It is an internal economy, not a diseconomy.
• B. Bureaucracy or red tapism. Too many layers and procedures slow the firm down. This is a diseconomy.
• C. Less personal relationship between management and employees. Communication becomes distant in a large firm. This is a diseconomy.
• D. Motivation may be lacking. Workers feel like a small part of a big organisation, so productivity may drop. This is a diseconomy.
• E. Slow response to changes. A large firm is harder to adjust quickly to market changes. This is a diseconomy.

Answer: Option A is the only one that describes an advantage rather than a disadvantage, so it is the one that is NOT an internal diseconomy of scale.

Exam tip: When you see "NOT a diseconomy" (or "NOT an economy"), look for the option with the opposite tone. Diseconomies use words like difficult, slow, lacking, red tape, less. The odd one out with positive words like easy and less cost is usually the answer.