In the text, we stated that the LRAC curve eventually slopes upward because of diseconomies of scale. In the previous chapter we saw that the SRATC curve eventually slopes upward because of diminishing marginal product of the variable factor.
a. Explain the difference between diseconomies of scale and diminishing marginal product of the variable factor. Why is one a short-run concept and the other a long-run concept?
b. Draw a diagram with short-run and long-run average cost curves that illustrates for the same level of output both diseconomies of scale and diminishing marginal product of the variable factor.