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. 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. Macroeconomics

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

    The branch of economics that analyzes the market behavior of ...
  6. Diseconomies Of Scale

    An economic concept referring to a situation in which economies ...
Related Articles
  1. Economics Basics
    Economics

    Economics Basics

  2. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  3. What Are Economies Of Scale?
    Economics

    What Are Economies Of Scale?

  4. Entrepreneur Vs. Small Business Owner, ...
    Investing Basics

    Entrepreneur Vs. Small Business Owner, ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center