Does the law of diminishing returns contradicts the concept of economies of scale?

These two concepts are not contradictory, yet they work together.

Diminishing returns states that at a certain point, your start losing productivity or returns at a certain level of production.

Economies of scale states that fixed costs will decrease per unit, the more you produce. This always holds true. No matter how much more you produces, fixed costs will decrease per unit produced.

Diminishing returns does not address the decreased marginal cost for producing more units like economies of scale does. Therefore, you can continue to produce more and reduce your costs but reach a point that it becomes unprofitable overall to do so.

Think of a farmer and fertilizer. If he buys in bulk, he will reduce his cost and fertilizer will increase his crops output. However, there comes a point where adding more fertilizer actually starts to hurt his crops even though it is still cheaper for him to buy in larger quantities.

answer; burned it;

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