Diseconomies of scale

economies of scale
The rising part of the long-run average cost curve illustrates the effect of diseconomies of scale. The Long Run Average Cost (LRAC) curve plots the average cost of producing the lowest cost method. The Long Run Marginal Cost (LRMC) is the change in total cost attributable to a change in the output of one unit after the plant size has been adjusted to produce that rate of output at minimum LRAC.

In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. The concept of diseconomies of scale is the opposite of economies of scale. It occurs when economies of scale become dysfunctional for a firm.[1] In business, diseconomies of scale[2] are the features that lead to an increase in average costs as a business grows beyond a certain size.

  1. ^ "Diseconomies of Scale Definition: Causes and Types Explained". Investopedia. Retrieved 2024-04-12.
  2. ^ Chappelow, Jim. "Understanding Diseconomies of Scale". Investopedia. Retrieved 2020-05-16.