What describes rising long-run average costs as a business expands beyond its minimum efficient scale?

Prepare for the Edexcel AS/A‑Level Business Theme 3 Exam. Engage with multiple choice questions and detailed explanations. Enhance your understanding and get exam ready with our comprehensive resources!

Rising long-run average costs as a business expands beyond its minimum efficient scale is accurately described by diseconomies of scale. This concept refers to the situation where a company's average costs per unit increase as the firm grows larger. When a business expands beyond its optimal size, it may face various challenges such as increased complexity, difficulties in management, and communication issues. These factors can lead to inefficiencies, ultimately driving up the costs of production.

In contrast, economies of scale refer to the advantages gained from scaling up production, which typically results in lower costs per unit as output increases until the minimum efficient scale is reached. Profit maximization focuses on achieving the highest possible profit level, which may not necessarily correlate with rising costs due to expansion. Over-capacity indicates a situation where a company produces more than the market demand, which isn't directly linked to rising average costs in the context provided by the question.

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