A dilemma of the theorem that the division of labor is limited by the extent of the market: either the division of labor is limited by the extent of the market, and , characteristically, industries are monopolized; or industries are characteristically competitive, and the theorem is false or of little significance.
Why does the firm not in the process become a monopoly? Because the average cost is a U-shape function. The marginal cost of a product in the short will be lower but after a certain point it will increase and so is average cost. So when the company becomes too big, it will turn from economics of scales into diseconomics of scales: that is, the problem of coordination and management of a gigantic company offset the profit of mass production.
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