Internal and external economies of scale, Microeconomics

Internal and external economies of scale:


Internal economies of scale are the advantages or benefits that the firm enjoys as it expands its size or increases its scale of operation. These may result from technical, financial, managerial, marketing and welfare advantages enjoyed by the firm and are as such said to be firm specific. External economies of scale on the other hand, are advantages or benefits gained by a firm, as the industry in which it operates grows larger.An industry grows when the number of firms constituting the industry increases. These advantages are in the form of availability of cheaper inputs like skilled labour, common services and research.

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