If the cost of production for a firm continues to increase as it output rises, the firm is said to be experiencing?

Answer Details

If the cost of production for a firm continues to increase as its output rises, the firm is said to be experiencing diseconomies of scale. Diseconomies of scale occur when a firm's long-run average cost of production increases as the scale of production increases. This means that as the firm produces more, it becomes less efficient and faces higher costs per unit of output. This can happen for a variety of reasons, such as a decrease in managerial efficiency, an increase in transportation costs, or a decrease in specialization and coordination. In contrast, economies of scale occur when a firm's long-run average cost of production decreases as the scale of production increases. This means that as the firm produces more, it becomes more efficient and faces lower costs per unit of output. Economies of scale can arise from factors such as specialization, division of labor, and increased bargaining power with suppliers. Understanding diseconomies of scale is important for firms because it can affect their profitability and competitiveness. When a firm experiences diseconomies of scale, it may need to consider restructuring or downsizing in order to improve its efficiency and reduce costs.