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Q. Causes for diseconomies of scale?
The most significant cause for diseconomies of scale is the diminishing returns to management. As the output grows beyond certain level the top management becomes overburdened, it becomes less efficient as coordinator and ultimate decision maker. So increase in the size of the plant beyond a certain large size makes managerial structure more complex and decreases the overall efficiency of the management.
Another cause for diseconomies of scale can be the exhaustible natural resources.
For example: increasing the fishing fleet may not cause an increase in catching of the fish.
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