When a company mining cobalt invests in machinery to replace some workers, eventually diseconomies of scale can occur due to several reasons. Let's break down the possible causes:
1. A) As more cobalt is mined, average costs increase:
- If the company keeps increasing the level of cobalt production without a corresponding increase in efficiency or optimization of resources, average costs might start to rise. This could be due to factors like diminishing returns to scale, increased maintenance costs for machinery, or other inefficiencies.
2. B) Fewer workers are needed to produce the required output:
- While reducing the number of workers through automation can initially increase efficiency, if the machinery doesn't operate optimally or requires high maintenance costs, this can lead to diseconomies of scale. Too much reliance on machinery with high fixed costs but diminishing returns can drive up average costs.
3. D) Overhead costs are spread as output increases:
- Initially, as output increases, spreading overhead costs over more units can lead to economies of scale and cost savings. However, if the overhead costs start to increase disproportionately or the machinery investment leads to excess capacity, this can result in diseconomies of scale.
In conclusion, various factors such as inefficient use of machinery, rising average costs with increased production, or disproportionate overhead costs due to excessive machinery investment can lead to diseconomies of scale for a company mining cobalt. Balancing the use of machinery with operational efficiency is crucial to avoid such inefficiencies and maintain profitability.
