Examples of Internal Diseconomies of scale
- 1. Managerial internal D.O.S. As the firm over expands beyond its optimum level, supervision of workers, decision making and coordination becomes difficult and this results into increased average costs of management.
- Financial internal D.O.S. Due to over expansion of the firm, it becomes very difficult to get enough money to finance all the production activities. This may force the firm to borrow at very high interest rates hence increasing the average costs of production.
- Marketing internal D.O.S. As the firm over expands it may get problems in form of limited markets for its products. In addition, prices if inputs may rise due to their increased demand and this results into increased average costs of production.
- Technical internal D.O.S. As the firm over expands the rate of depreciation of the machines increases. This forces the firm to incur high costs of repair and maintenance hence increased average costs of production
- Transport internal D. O.S. As the firm expands the transport facilities may be over utilized due to transporting heavy and bulky products. This results into break down of infrastructure and vehicles, forcing the firm to incur higher costs of repair.
- Storage internal D.O.S. This occurs when the firm has limited storage facilities yet the output is increasing. This forces the firm to incur high storage costs hence diseconomies of scale.
- Social internal D.O.S. These can be in form of congestion which results into easy spread of diseases, increased theft etc.
CATEGORIES Economics
TAGS Dr. Bbosa Science
