Increasing complexity of management and challenges of coordination as firms produce a wider variety of products can be a source of:_________

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12-09-2022
Social Studies

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Increasing complexity of management and challenges of coordination as firms produce a wider variety of products can be a source of:_________

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AnnuG AnnuG · Answer 1 · 2022-09-18T10:01:25+02:00

Increasing complexity of management and challenges of coordination as firms produce a wider variety of products can be a source of: diseconomies of scope.

It is a situation when the average cost of production decreases as the output increases due to increase in the size of the organization and it become difficult and costly to coordinate or manage worker or other inputs. It also causes diminishing marginal product in the long run. It is opposite of economies of scale. Diseconomies arise due to use of unskilled laborer and outdated technologies for production.

Economies of scale are the cost advantages that companies obtain due to size output or scale of operation. The cost per unit of output generally decreases when the scale increases because fixed costs are spread out over more units of output. Economies of scale apply to a variety of organizational and business situations and at various levels, such as a business or manufacturing unit, plant or an entire enterprise.

Learn about diseconomies of scope:

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