What phenomenon occurs when increases in production lead to increases in long run average costs?

Diseconomies of scale occur when an increase in production results in an increase in long-run average costs. This phenomenon typically arises when a company grows beyond its optimal size, leading to inefficiencies. As firms increase their output, they might face difficulties such as over-complexity in management, communication challenges, and logistical inefficiencies. These factors can lead to rising costs per unit produced as the scale of operation expands.

Understanding this concept is crucial in economics, as firms must carefully assess their capacity for growth to avoid such pitfalls. The relationship of production to cost is essential for making informed decisions about scaling business operations effectively.