Webster*s definition of diseconomy is lack of economy or a factor responsible for an increase in costs. As shown in the diagram above diseconomies of scale and economies of scale are the complete opposite. Diseconomies of scale occur for a number of reasons. One reason is when a specific process cannot produce the same amount of output as another related process. For example if a product required letters A and B diseconomies of scale might occur if letter B is produced at a slower rate than letter A. Another cause for diseconomies of scale that as output increases, costs of transporting the good to distant markets can increase enough to affect the economies of scale. For example if a large plant produces large output, the more it produces the more they need to ship out to distant locations. These and many other reasons all cause diseconomies of scale.
             Alfred Marshall made a distinction between internal and external economies of scale. When a company reduces costs and increases production, internal economies of scale have been achieved. External economies of scale occur outside of a firm, within an industry. Thus, when an industry's scope of operations expand due to for example the creation of a better transportation network, resulting in a subsequent decrease in cost for a company working within that industry, external economies of scale are said to have been achieved. With external ES, all firms within the industry will benefit. External economies of scale can also be realized from the above-mentioned inputs as a result of the company's geographical location. Thus all fast food chains located in the same area of a certain city could benefit from a lower transportation costs and a skilled labor force. Moreover, support industries may then begin to develop, such as dedicated fast food potato and/or cattle breeding farms. External economies of scale can also be reaped if the industry lessens the burdens of costly inputs, by shari
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