Search Investopedia

Diseconomies Of Scale

Filed Under »
Dictionary Says

Definition of 'Diseconomies Of Scale'

An economic concept referring to a situation in which economies of scale no longer function for a firm. Rather than experiencing continued decreasing costs per increase in output, firms see an increase in marginal cost when output is increased.

Diseconomies Of Scale
Investopedia Says

Investopedia explains 'Diseconomies Of Scale'

Diseconomies of scale can sometimes occur for the follow reasons:

1) A specific process within a plant cannot produce the same quantity of output as another related process. For example, if in a product required both gadget A and gadget B, diseconomies of scale might occur if gadget B is produced at a slower rate than gadget A.

2) As output increases, costs of transporting the good to distant markets can increase enough to offset any economies of scale. For example, when a firm has a large plant capable of producing a large output located in one location, the more the firm produces, the more it needs to ship to distant locations.

Related Definitions

  •

    Classical Economics

    Classical economics refers to work done by a group of economists in the eighteenth and nineteenth centuries. They developed theories about the way markets and market economies work. The ...
    Read More »

  • Dismal Science

    A term coined by Scottish writer, essayist and historian Thomas Carlyle to describe the discipline of economics. The term dismal science was inspired by T. R. Malthus' gloomy prediction ...
    Read More »

  • Economic Profit (Or Loss)

    The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used. This can be used as another name for "economic value added" (EVA).
    Read More »

    • Economic Value Added - EVA

      A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also ...
      Read More »

    • Economics

      A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be ...
      Read More »

    • Economies Of Scale

      The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through ...
      Read More »

    • Economies of Scope

      An economic theory stating that the average total cost of production decreases as a result of increasing the number of different goods produced.
      Read More »

    • Ramp Up

      A significant increase in the level of output of a company's products or services. A ramp up typically occurs in anticipation of an imminent increase in demand. While it is generally a ...
      Read More »

    • Scalability

      A characteristic of a system, model or function that describes its capability to cope and perform under an increased or expanding workload. A system that scales well will be able to ...
      Read More »

    • External Diseconomies Of Scale

      External factors beyond the control of a company increases its total costs, as output in the rest of the industry increases. The increase in costs can be associated with market prices ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions