Question

Suppose that the firm boosts its scale of operations from a level consistent with short-run average cost curve ${\mathrm{SAC}}_3$to shortrun average cost curve ${\mathrm{SAC}}_5$. Explain what happens with respect to economies or diseconomies of scale.

Short answer

The economies of scale is a cost advantage delighted in by the organizations, it happens when the expansion in plant size prompts the below expenses for the organizations.

Step-by-step solution

Introduction

The diseconomies of scale are only inverse of economies of scale when the firm grows the creation prompts expansion of normal expense.

Explanation

The diseconomies of scale lead to restricting the extension of results, a portion of the diseconomies of scale is because of co-appointment disappointment, low inspiration for labourers in the organizations, head specialist issues and so forth. The best illustration of economies of scale is specialization and division of work. This empowers the labourers to do proficient assignments with a little preparation so this prompts a below complete expense.