compete for long against plants with lower average costs of production. However, in some planned economies,

like the economy of the old Soviet Union, plants that were so large as to be grossly inefficient were able to

continue operating for a long time because government economic planners protected them from competition

and ensured that they would not make losses.

Diseconomies of scale can also be present across an entire firm, not just a large factory. The leviathan effect

can hit firms that become too large to run efficiently, across the entirety of the enterprise. Firms that shrink

their operations are often responding to finding itself in the diseconomies region, thus moving back to a lower

average cost at a lower output level.

LINK IT UP

Visit this website (http://openstax.org/l/Toobig) to read an article about the complexity of the belief that banks

can be “too-big-to-fail.”

The Size and Number of Firms in an Industry
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