Thomas McCraw, a professor at the Harvard Business School has written the follow

Question

Thomas McCraw, a professor at the Harvard Business School has written the following: "Throughout American history, entrepreneurs have tried, sometimes desperately to create big businesses out of naturally small-scale operations. It has not worked" Entrepreneurs hope to increase profitability by creating "big businesses." Unless there are significant economics of scale they will not be successful. In the figure, firms producing at a level of output that is a small fraction of total industry sales represented by LRAC_1, have the lowest average costs for most levels of output. If a firm tries to grow to a larger site, such as that represented by LRAC_2, its average costs will rise. If an entrepreneur is planning on producing 6,000 units, should he choose the smaller or luger operation? The larger operation. Either the smaller or larger operation. The smaller operation.

Explanation / Answer

The correct option is larger operations.

This will help the economist in creating big business, and help in increasing the profitability for the business.

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