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 black part of the average cost curve represent?

  Achieving economies of scale
• What does the red line on the average cost curve symbolize?

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

  • Employee coordination issues
  • Decreased employee motivation
  • Increased communication costs
• How does employee coordination lead to diseconomies of scale?

  It causes duplication of tasks and overcrowding
• Why does employee motivation affect diseconomies of scale?

  Demotivated employees are less productive
• How does employee communication contribute to diseconomies of scale?

  Increased costs and potential demotivation
• What is the impact of a top-down communication approach on employees?

  It may lead to employee demotivation
• What is the minimum efficient scale?

  The point of maximum economies of scale
• What happens to average cost per unit as output increases beyond the minimum efficient scale?

  Average cost per unit increases
• If a business has too many employees, what is a likely consequence?

  Increased average costs per unit
• How does overcrowding of employees affect operational efficiency?

  It leads to duplication of tasks
• What is a potential effect of employees feeling like a cog in the machine?

  Decreased motivation and productivity
• How does communication cost increase with more employees?

  More employees require more communication efforts
• What is the relationship between output increase and average cost per unit?

  Higher output can lead to higher average costs
• What does the average cost curve illustrate?

  The relationship between output and average cost
• What is the significance of the average cost curve's shape?

  It shows economies and diseconomies of scale