What term describes the phenomenon where long-run average costs increase as the scale of production rises?
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Diseconomies of scale
While 'economies of scale' make things cheaper as you grow, 'diseconomies' occur when a company becomes so large that communication breaks down and management becomes inefficient. This often results in a 'U-shaped' long-run average cost curve for many businesses.
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- In economics, what term is used for the rise in long-run average costs that occurs as a firm increases its scale of production?