Glossary · Micro · Production and costs

Economies and diseconomies of scale

Economies of scale: cost per unit falls as the firm grows, because fixed costs spread out and big firms can specialise and buy in bulk. Diseconomies of scale: past some size cost per unit rises again, usually because a huge organisation gets hard to manage.

Also called: diseconomies of scale, increasing returns

Taught in: Economies of Scale

Related terms

Long-run average cost (LRAC)Minimum efficient scale (MES)Natural monopolyReturns to scale

More from production and costs

Average fixed cost (AFC)Average product of labor (APL)Average total cost (ATC)Average variable cost (AVC)Cobb-Douglas production functionFixed cost (FC)IsoquantLaw of diminishing marginal returns

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