Question:

What are the sources of diseconomies of scale ? how does each eventually cause average unit cause to rise as?

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output increases

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  1. At a certain point firms get hard to manage due to thier large size. This causes many inefficiencies, which raises costs.


  2. Some sources are that bigger company is hard to manage - information flows comes with lags and consequently becomes inadequate. Another possible explanation is that markets are limited in size and scattered - so long logistics networks make service ineffective and costly.

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