Diseconomies of scale, Describe why some firms might suffer

Diseconomies of scale

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An analyst in the production department for Chevrolet Caprice stated that "The marginal cost of a Caprice, given our current volume, is $12,500. Of course, the actual marginal cost depends on the number of cars produced. The larger the number produced, the lower the unit cost because we will spread out our design and tooling costs over more cars."

Economies of scale help firms to lower their production cost per unit and therefore, many firms are merged or in the process of merging. However, some large firms may suffer diseconomies of scale. Explain why some firms may suffer diseconomies of scale. Do you know any examples? Could GM be an example of diseconomies of scale?

Reference no: EM1370142

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