ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Diseconomies of scale occur when the expansion of output comes with increasing average unit costs. Diseconomies of scale can involve factors internal to an operation or external conditions beyond a firm’s control.

Detailed explanation-2: -There are internal types of diseconomies of scale, like technical, organizational and financial diseconomies, and external diseconomies of scale, like infrastructure.

Detailed explanation-3: -Diseconomies of scale occur when a firm experiences an increase in its average cost as its total output increases. Economies of scale are the opposite of diseconomies of scale. They occur when a company experiences a decrease in average cost as the total output increases.

Detailed explanation-4: -Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between the per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost.

Detailed explanation-5: -The main reason as to why the firm encounters diseconomies of scale are because the expansion of firms comes with additional costs such increase the number of employed staffs and administration costs among other costs.