Economics Cost Of Production Questions
There are three main types of diseconomies of scale:
1. Managerial diseconomies: This occurs when a firm becomes too large and complex to be effectively managed. As the organization grows, decision-making becomes slower and less efficient, leading to increased costs and decreased productivity.
2. Coordination diseconomies: This refers to the difficulties in coordinating and integrating various departments or functions within a large organization. Communication breakdowns, conflicts, and inefficiencies can arise, resulting in higher costs and reduced productivity.
3. Financial diseconomies: This occurs when a firm's size and complexity make it more difficult to access and manage financial resources. Larger firms may face higher interest rates on loans, increased administrative costs, and difficulties in obtaining favorable terms from suppliers, leading to higher production costs.