Economics Short Run Vs Long Run Costs Questions
Diseconomies of scale in the long run refer to the situation where a firm's average costs start to increase as it expands its production and increases its scale of operations. This occurs when the firm becomes too large and complex, leading to inefficiencies and coordination problems. Factors contributing to diseconomies of scale include communication difficulties, increased bureaucracy, and diminishing returns to management. As a result, the firm experiences higher costs per unit of output, reducing its profitability in the long run.