Managerial Questions On Managerial Economics

1736 Words Apr 14th, 2016 7 Pages
MANAGERIAL ECONOMICS

MANDIP SINGH SETHI
K1300050

TABLE OF CONTENTS

INTRODUCTION…………………………………………………………………………………………………..3

TYPES OF DISECONOMIES………………………………………………………………………….5

DECENTRALIZATION…………………………………………………………………………………6

CONCLUSION……………………………………………………………………………………………..7

REFERENCE……………………………………………………………………………………………….8

What are managerial diseconomies of scale and what, if anything, can be done about this phenomenon?

Decreasing returns to scale or diseconomies of scale implies rising average costs (AC) as the firm’s output and scale increase (Samuelson and Marks, 2006).

Diseconomies take place when the Transaction cost (TC) of the company rises. “Transaction costs refer to the costs involved in market exchange. These include the costs of discovering market prices and the cost of writing and enforcing contracts” (Khemani R, 1993). Firms that have low TC have a better chance at preventing diseconomies of scale and increase the firm’s growth.

Over the decade many opportunities have presented itself and helped drop the transaction cost drastically; firstly the development in technology has helped decrease the cost of communication over the years (Huang, Kinshuk and Chen, n.d.). With the introduction of the World Wide Web the method of communication, especially within the businesses was revolutionised with cost effective methods of communication such as email (Jenkins, Köhler and Shackleton, 2005).…

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