Diseconomies of scale

• What are diseconomies of scale?

  Increased average costs with increased output
• What happens to average cost per unit after reaching economies of scale?

  It begins to increase with further output
• What does the average cost curve illustrate?

  • Cost per unit on the y-axis
  • Output on the x-axis
  • Curvy line representing average cost
• What is the minimum efficient scale?

  The point of maximum economies of scale
• What does the red line on the diagram symbolize?

  Diseconomies of scale
• What are the three common reasons for diseconomies of scale?

  1. Employee coordination issues
  2. Employee motivation decline
  3. Employee communication costs
• How does employee coordination lead to diseconomies of scale?

  Overcrowding causes duplication of tasks
• Why does employee motivation decline in large businesses?

  Employees feel less significant and demotivated
• How does poor employee communication contribute to diseconomies of scale?

  Increased costs and top-down communication approach
• What is the overall effect of increasing output beyond the minimum efficient scale?

  Average cost per unit increases
• What are the implications of diseconomies of scale for a business?

  • Increased average costs
  • Potential for reduced profitability
  • Need for careful management of growth