Diseconomies of scale (AS/A LEVELS/IB/IAL)

Diseconomies of scale (AS/A LEVELS/IB/IAL)

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Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

Diseconomies of scale


Diseconomies of scale occur when output increases, long run average costs also increase.

Examples of Diseconomies of Scale


As the firm expands and grows in size, some workers may start to feel excluded. This may lead to a loss of motivation, suggesting lower productivity levels and higher average costs


The larger a firm gets, the harder it can become to manage all employees and monitor their productivity


The larger a firm gets, the harder it can become to manage all employees and coordinate each worker

At first, average costs fall as firms can benefit from Economies of Scale. This is shown at point A on the graph – as average costs fall, output increases

However – reaching the optimum level of output – average costs start to rise, due to Diseconomies of Scale. This is shown by point B on the graph

The Minimum Efficient Scale is the lowest point on the graph and depicts when average costs are the lowest and Economies of Scale are fully utilised


Quick Fire Quiz – Knowledge Check

1. Define ‘Diseconomies of Scale’ (2 marks)

2. Identify and explain three examples of Diseconomies of Scale (6 marks)

3. Using a diagram, explain how: Economies of Scale, Diseconomies of Scale, and the Minimum Efficient Scale occur (6 marks)


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