- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 5. Company Analysis: Past and Present
- Subject 4. Operating Profitability and Working Capital Analysis
CFA Practice Question
Which of the following provides the best explanation for diseconomies of scale?
B. Reduced monitoring costs
C. Higher resource prices
D. Indivisible set-up costs
A. The presence of fixed inputs
B. Reduced monitoring costs
C. Higher resource prices
D. Indivisible set-up costs
Correct Answer: C
Note: Indivisible set-up costs help explain economies of scale.
User Contributed Comments 3
| User | Comment |
|---|---|
| Oksanata | where did they get that invisible set-up costs for economies of scale? I see only mass production is more economical+specialization of labor+workers tend to learn more from their experience...What's that invisible set-up costs? |
| schweitzdm | I am not sure, @Oksanata. I checked the CFAI book and didn't see it either, but I might have missed it! The topic is discussed around page 127 of the Econ book. |
| Huricane74 | @Oksanata: InDIvisible set up costs are fixed costs. From an accounting point of view, these are costs that all allocated based on the quantity produced or over a period of time. |