Diseconomies of Scale Flashcards
When does diseconomies of scale take place?
It happens when a business grows so large that the business’ products average unit cost increases.
How do coordination issues cause diseconomies of scale?
As a firm grows, the way the firm functions or operates becomes more complex. New departments and different teams may be located in different places. This can make it harder and more expensive to manage effectively.
How does lower employee motivation cause diseconomies of scale?
Workers can become demotivated if they feel like a cog in a wheel and can’t see the impact of their on the business’ overall performance. This may result in a drop in productivity and an increase in average unit cost.
How does communication issues cause diseconomies of scale?
In a larger business, communication becomes more difficult because of the size of the work force and the number of different divisions in the business.
