Question
What is the difference between “diminishing marginal returns” and
“diseconomies of scale”?
Both concepts explain why average total cost increases after some point but
diminishing marginal returns applies only in the short run when there is at least one
fixed factor, while diseconomies of scale applies in the long run when all factors are
variable.
Diminishing marginal returns, which applies only in the short run when at least one
factor is fixed, explains why marginal cost increases, while diseconomies of scale,
which applies in the long run when all factors are variable, explains why average
cost increases.
Diminishing marginal returns, which applies only in the long run when all factors are
variable, explains why average variable cost increases, while diseconomies of scale,
which applies in the short run when at least one factor is fixed, explains why
average total cost increases.
Both concepts explain why marginal cost increases after some point but diminishing
marginal returns applies only in the short run when there is at least one fixed factor,
while diseconomies of scale appljes in the long run when all factors are variable.
“diseconomies of scale”?
Both concepts explain why average total cost increases after some point but
diminishing marginal returns applies only in the short run when there is at least one
fixed factor, while diseconomies of scale applies in the long run when all factors are
variable.
Diminishing marginal returns, which applies only in the short run when at least one
factor is fixed, explains why marginal cost increases, while diseconomies of scale,
which applies in the long run when all factors are variable, explains why average
cost increases.
Diminishing marginal returns, which applies only in the long run when all factors are
variable, explains why average variable cost increases, while diseconomies of scale,
which applies in the short run when at least one factor is fixed, explains why
average total cost increases.
Both concepts explain why marginal cost increases after some point but diminishing
marginal returns applies only in the short run when there is at least one fixed factor,
while diseconomies of scale appljes in the long run when all factors are variable.
Ask by Wright Munoz. in the United States
Mar 28,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Diminishing marginal returns happens in the short run when at least one factor is fixed, leading to higher marginal costs. Diseconomies of scale occurs in the long run when all factors are variable, causing higher average costs.
Solution
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Bonus Knowledge
Diminishing marginal returns and diseconomies of scale both highlight crucial points in production efficiency. Imagine you’re baking cupcakes; initially, adding more helpers speeds up the process. However, too many cooks in the kitchen leads to less efficiency—like tripping over each other—and that’s where diminishing returns come into play. It’s all about those short-term constraints when you’re juggling limited oven space or mixing bowls!
On the flip side, think of a big factory producing widgets. As they scale up production, they might face coordination issues, communication breakdowns, or even logistical nightmares as the team expands. These problems fall under diseconomies of scale, where increasing output leads to higher average costs in the long run, creating a scenario where more is not always merrier. Balancing efficiency with growth is key!
