Understanding Diseconomies of Scale in Market Structures

The video tutorial explains diseconomies of scale, where average costs increase as a firm grows. It uses examples of factory expansion to illustrate how increased size can lead to inefficiencies. Graphical representations show how average cost curves behave under these conditions. Managerial diseconomies, such as poor communication and low motivation, are discussed as contributing factors. The tutorial concludes by examining how diseconomies of scale affect market structure, often leading to markets with many small firms due to the higher costs faced by larger firms.

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