Diseconomies Of Scale

AAA

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 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 TERMS
  1. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  2. Economic Profit (Or Loss)

    The difference between the revenue received from the sale of ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Economies of Scope

    An economic theory stating that the average total cost of production ...
  5. Classical Economics

    Classical economics refers to work done by a group of economists ...
  6. Economic Value Added - EVA

    A measure of a company's financial performance based on the residual ...
Related Articles
  1. What Are Economies Of Scale?
    Economics

    What Are Economies Of Scale?

  2. Economics Basics
    Economics

    Economics Basics

  3. Competitive Advantage Counts
    Active Trading

    Competitive Advantage Counts

  4. 5 Lessons From The Recession
    Trading Strategies

    5 Lessons From The Recession

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center