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 Form 3 Business Studies: Size and location of a firm lessons

External diseconomies of scale and their examples

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Answer Text:
External diseconomies of scale;
-These are disadvantages experienced by firms within the industry arising from large scale operations hence increase in cost of production.
They include:
-Competition for available market as number of firms
producing similar products increase.
-Scramble for available labour and high salaries
-Inadequate raw materials-Shortage of raw materials arises as firms compete leading to increased cost.
-Difficulties of obtaining land for expansion
-Inadequate power and rationing-power may become inadequate leading to rationing.
-High rent and cost of financing the business.