what happens When diseconomies of scale occur?

Diseconomies of scale are the forces that cause larger firms and governments to produce goods and services at increased per-unit costs. The concept is the opposite of economies of scale.
Diseconomies of scale occurs when average costs start to rise with increased output. Therefore there will be decreasing return to scale.
Diseconomies of scale: increase in long-term average cost of production as the scale of operations increases beyond a certain level. This anomaly may be caused by factors such as (1) overcrowding when men and machines get in each other's way, (2) greater wastage due to lack of coordination, or (3) a mismatch between the optimum outputs of different operations.
Definition of diseconomies of scale: an economic concept referring to a situation in which economies of scale no longer function for a firm. Rather than experiencing continued decreasing costs per increase in output, firms see an increase in marginal cost when output is increased.

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When Diseconomies Of Scale Occur

Diseconomies Of Scale Definition

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Diseconomies of scale occur when the cost to produce a product starts to increase rather than remain steady or decrease. This usually occurs as companies grow to a point where efficiency starts to decline. Employees have to communicate through multiple channels and coordination difficulties weigh on operations and increase costs.

The firm will do the reverse, decreasing output. The diseconomies are usually because of rare raw material or skilled labor. If it increases output, it will have to offer more higher price. So the firm will try to maximize profit at MC=MR in the short term, and not increase output in the long term.

As the firm expands, its average cost increase. Essentially, the firm is getting too big for its own good and this is increasing its costs, on average.