External Diseconomies Of Scale

AAA

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.

INVESTOPEDIA EXPLAINS '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. Economies Of Scale

    The cost advantage that arises with increased output of a product. ...
  2. Diseconomies Of Scale

    An economic concept referring to a situation in which economies ...
  3. Economic Profit (Or Loss)

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

    A social science that studies how individuals, governments, firms ...
  5. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
  6. Microeconomics

    The branch of economics that analyzes the market behavior of ...
Related Articles
  1. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  2. What Are Economies Of Scale?
    Economics

    What Are Economies Of Scale?

  3. Economics Basics
    Economics

    Economics Basics

  4. How To Create A Business Succession ...
    Entrepreneurship

    How To Create A Business Succession ...

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

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

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

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. 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 ...
  6. Pareto Principle

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