Can You Explain Economies And Diseconomies Of Scale? Give Examples Of Each.

5 Answers

Matt Tung Profile
Matt Tung answered
[Internal} Diseconomies of scale is when per-unit costs increase which occurs when a firm/company grows too big - it starts to get 'out of hand/control' -- e.g. Too many staff, may be hard to manage them all (Managerial) - and may have problems communicating / co-operating, etc.

Examples of external diseconomies of scale may be that OTHER firms come into the market, taking advantage of the 'potential' your firm has built up in that area (e.g. "Oh, the computers in USA are very good in quality ! (假如)" -- then a new firm comes into market - gaining advantage on that )
Anonymous Profile
Anonymous answered
Economies and diseconomies of scale are two opposite concepts. An economy of scale is the point at which the quantity produced by the company gives the company the low cost advantage and at this point the company incurs the minimum cost advantage.On the other hand when the production is less than the proportion of the input then the costs of production increases and it leads to diseconomies of scale. Average cost is high in the diseconomies of scale. For example, if a fast food restaurant buys potato in bulk and it produces French fries from it. If the outlet buys potato in bulk then up to a certain level it will be economy of scale while if it buys a huge bulk and it does not incur much sales then the investment in input is the extra cost incurred which is diseconomies of scale
amber Jhon Profile
amber Jhon answered
Basically diseconomies of scale is the point where the firms face high per unit cost for each additional unit produced. It is just opposite to the economies of scale. Usually it is considered that when the size of the business gets so huge that it becomes difficult for a business to control the cost then diseconomies of scale can occur. You can take the example of a company which stores steel in a large amount to make steel products, because the firm finds that in future the prices of steel will increase. The huge storage of steel in the warehouse can increase the warehouse cost of the company and company may incur an increased cost per unit. Therefore, it is best for the companies to work  on economies of scale. There are many reasons because of which diseconomies of scale can occur like poor communication, lack of motivation and loss of direction. For complete details visit the link:

Diseconomies of scale

John Adams Profile
John Adams answered
In a given organization, there are many departments. In a given country there are several industries. In order to maximize on their production respectively, these particular entities can decide to share some of the available resources. The result of sharing finances, managerial resource, raw materials, technical skill is what is known as economies of scale and this infact makes the industry or organization perform better, minimize costs, be protected by the government.

Reasons why this is likely:
1. To help each other survive as an industry
2. For mutual benefit
3. To boost production
4. The most important one, to get a wider market both for resources and consumers.
Anonymous Profile
Anonymous answered
As plant size increases, the costs of production are spread over larger units of production resulting in reduced per unit costs of production,this phenomenon is known as ecomics of scale.Diseconomies of scale are are represented by a firms long run average costs of production increasing with increased levels of output.
The key difference between the two is that there are no marginal returns in the long run

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