Diseconomies of Scale | A-Level Economics Model Paragraph

Explain how a firm can experience Diseconomies of Scale

When a firm become larger and produces more output, they are impacted by both economies of scale and diseconomies of scale at the same time. After the minimum efficient scale, diseconomies of scale will outweigh economies of scale. Diseconomies of scale occur when long run average costs increase due to an increase in output. Firms like Starbucks are large, so staff may have less motivation. For example, they may feel less important so they may not demonstrate great customer service skills compared to the staff at a local cafe. This means a larger firm may see a decrease in productivity. Therefore, average costs of hiring staff are greater. These are known as communication problems. Secondly, if something is wrong in a large firm, such as a technical fault, or an unproductive member of staff, it would take far longer to identify and solve the problem compared to this same issue in a small firm. These are known as co-ordination diseconomies of scale.

A-Level Economics Tutoring

I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.