Diseconomies of scale,
Definition of Diseconomies of scale:
The diagram below illustrates a diseconomy of scale. At the point Q*, this firm is producing at the point of lowest average unit cost. If the firm produces more or less output, then the average cost per unit will be higher. To the left of Q*, the firm can reap the benefit of economies of scale to decrease average costs by producing more. The right of Q* the firm experiences diseconomies of scale and increasing average unit cost.
Diseconomies of scale happen when a company or business grows so large that the costs per unit increase. It takes place when economies of scale no longer function for a firm. With this principle, rather than experiencing continued decreasing costs and increasing output, a firm sees an increase in costs when output is increased.
Increase in long-term average cost of production as the scale of operations increases beyond a certain level. This anomaly may be caused by factors such as (1) over-crowding where men and machines get in each others way, (2) greater wastage due to lack of coordination, or (3) a mismatch between the optimum outputs of different operations. See also economies of scale.
How to use Diseconomies of scale in a sentence?
- Diseconomies of scale occur when the expansion of output comes with increasing average unit costs.
- Diseconomies of scale may result from technical issues in a production process, organizational management issues, or resource constraints on productive inputs.
- Your customers may not like it but you may have no choice but to raise prices if there is a diseconomies of scale .
- Diseconomies of scale can involve factors internal to an operation or external conditions beyond a firm's control.
- You may have to raise the price on your product if the diseconomies of scale gets out of hand and is costing to much.
- The diseconomies of scale were reason enough to suggest we exit the industry so we passed on our recommendation to senior management.
Meaning of Diseconomies of scale & Diseconomies of scale Definition