External Diseconomies Of Scale

DEFINITION of '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 increasing for some or all of the factors of production.

BREAKING DOWN 'External Diseconomies Of Scale'

Factors of production are the inputs that firms use in order to produce output. The inputs include land, labor and capital. Some economists include entrepreneurship as well.

For example, assume there is a manufacturer of 'widgets' in a given city. If the average wage level increases across all other markets as a result to an increased demand for labor, then to entice workers to produce "widgets", the manufacturer must pay more in wages, which will raise the total costs.

RELATED TERMS
  1. External Economies Of Scale

    The lowering of a firm's costs due to external factors. External ...
  2. Capacity

    The maximum level of output of goods and/or services that a given ...
  3. Diseconomies Of Scale

    An economic concept referring to a situation in which economies ...
  4. Factors Of Production

    An economic term to describe the inputs that are used in the ...
  5. Factor Market

    A marketplace for the services of a factor of production.
  6. Productivity

    An economic measure of output per unit of input. Inputs include ...
Related Articles
  1. Professionals

    Modifying Output

    Modifying Output. Learn the difference between the economic short and long runs.
  2. Economics

    Calculating Production Costs

    Production cost is any expense associated with manufacturing a good or providing a service.
  3. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  4. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  5. Economics

    Explaining Prime Cost

    Prime cost is a way of measuring the total cost of the production inputs needed to create a given output.
  6. Economics

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  7. Economics

    Factors Of Production

    Factors of production is an economic term describing the general inputs used to produce goods and services to make a profit. Under the classical view of economics, the factors of production consist ...
  8. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.
  9. Professionals

    Break-Even Analysis

    This analysis is used to determine the point at which revenue received equals the costs associated with receiving the revenue
  10. Professionals

    Marginal and Average Total Cost Curves

    Marginal Cost Curve and the Average Total Cost Curve. Learn the different types of economic cost curves and the law of diminishing returns.
RELATED FAQS
  1. What's the difference between diminishing marginal returns and returns to scale?

    Understand the main differences between the law of diminishing marginal returns and the concept of returns to scale through ... Read Answer >>
  2. What's the difference between the production cost and the manufacturing cost?

    Learn more about fixed and variable expenses incurred by businesses. Find out how production and manufacturing costs impact ... Read Answer >>
  3. What is the difference between external economies and external diseconomies?

    Learn to differentiate between external economies and external diseconomies, as well as between external economies and diseconomies ... Read Answer >>
  4. How do I decide whether a credit card offer is a good deal or not?

    Discover the ways that externalities lead to market failure. Externalities are costs or benefits that go to a third party, ... Read Answer >>
  5. Why are the factors of production important to economic growth?

    Find out why the factors of production are critical for real economic growth, where wages rise and consumer goods costs fall ... Read Answer >>
  6. What inputs are considered to be factors of production?

    Learn what the economic term "factors of production" means, what the four categories of factors of production are and what ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. 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 ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center