Certified Production & Operations Manager (POM) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Certified Production and Operations Manager Exam with multiple choice questions and detailed explanations. Boost your confidence and optimize your study time for the exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is a potential negative outcome of experiencing diseconomies of scale?

Increased efficiency
Lower average costs
Decreased profitability
Higher production speeds

The correct answer is: Decreased profitability

Experiencing diseconomies of scale occurs when a company grows beyond an optimal size, leading to increased per-unit costs as output rises. This situation can arise due to various factors such as increased bureaucratic processes, communication breakdowns, or inefficiencies related to management and resource allocation. As a result, the average costs of production escalate rather than decrease, significantly impacting the financial performance of the organization. Decreased profitability becomes a realistic concern because as production costs increase, the margin between revenue and costs narrows. This can squeeze profit margins, leading to lower overall profitability for the organization. Therefore, recognizing the potential for diseconomies of scale is crucial to maintain operational efficiency and profitability.