in long run if increasing output causes total production costs to increase at a decreasing rate - then is it not diseconomies of scale CFAI says -econmies of scale - Eco book p-148-Q5
No diseconomies of scale cause total production costs to increase at an increasing rate. It comes down to Average Total Cost: ATC decreases as output increase = economies of scale ATC remains constant as output increase = constant economies of scale ATC increases as output increase = diseconomies of scale
whats the difference ‘Total production costs’ and ‘Average production costs’ -I mean I get the meaning of ‘Total’ and ‘Average’ but where does it says that total prod costs increase at increasing rate - and its econmies of scale
To really understand it, you need to know the relationship between average total cost, average variable cost, average fixed cost, marginal cost, and total cost. If costs are increasing at increasing rate, marginal costs are rising which will increase ATC and display diseconomies of scale. If costs are increasing at decreasing rate, marginal costs are decreasing which will decrease ATC and display economies of scale. All you really need to know though is what I said above.
thx - very clear thinking!!