Principles of Microeconomics / Unit 6 MIC 0536 short lesson, about 20 seconds
Constant Returns and Diseconomies of Scale
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The idea
Constant returns to scale hold where expanding every input leaves average cost unchanged, the flat stretch. Diseconomies of scale set in where a bigger firm costs more per unit, usually from coordination failures.
In practice
A firm too large to manage pays for meetings about meetings.
Where people slip
The flat stretch is often wide, which is why one industry holds firms of many sizes.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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