Explain the difference between diseconomies of scale and diminishing marginal product of the variable factor. Why...

Explain the difference between diseconomies of scale and diminishing marginal product of the variable factor. Why is one a short-run concept and the other a long-run concept

Expert Solution

Diminishing marginal return is a short run concept which occurs when one factor or production is fixed. When the variable factor is increased (labour), there comes a point where the labour will be less productive and eventually there will be diminishing marginal and average product.

This law applies only in the short run since in the long run all the factors of production are considered to be variable.

On the other hand, diseconomies of scale is a long run concept which occurs when increased outputs lead to a rise in long run average costs i.e. the company no longer enjoys economies of scale.

Thus, while both the concepts explain why average costs increase after some time - diminishing returns to scale look at how production output decreases with one unit increase in input, diseconomies of scale depict how per unit costs increase as output increases - one is a short run concept and other a long run concept respectively.

Rahul Sunny answered 1 year ago

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Explain the difference between diseconomies of scale and diminishing marginal product of the variable factor. Why...

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