Which term describes increases in cost per unit as output increases?

The correct term that describes increases in cost per unit as output increases is diseconomies of scale. This phenomenon occurs when a company grows beyond an optimal size, leading to inefficiencies and higher per-unit costs. Factors contributing to diseconomies of scale can include complex management structures, communication issues, and redundancy in processes, all of which can make it more expensive to produce additional units of a product.

In contrast, economies of scale refer to the cost advantages that organizations experience as they increase their production. Minimum efficient scale is the lowest point at which the average cost of production per unit is minimized and is often associated with how companies can leverage these economies. Cost leadership is a competitive strategy aimed at achieving a cost advantage in the industry, which is different from the concept of per-unit cost behavior as production increases.

Understanding diseconomies of scale is crucial for strategic management as it highlights the balance companies must maintain between scaling operations and maintaining efficiency.