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What are Diseconomies of Scale and Diseconomies of Scope?

Economics Dec 08, 2020

What are Diseconomies of Scale and Diseconomies of Scope?

Expert Solution

Diseconomies of scale refer to a situation where a firm grows so big that the cost per unit rises. The company focuses on the rise in cost when the output is increased rather than experiencing a continued decrease in costs and an increase in output. Various types of diseconomies of scale include external and internal diseconomies. However, diseconomies of scope refer to a situation where the average production cost is higher from the joint production of services than the average cost from the former independent production of the services.

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