ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Key Takeaways. External economies of scale are business-enhancing factors that occur outside a company but within the same industry. In addition to lower production and operating costs, external economies of scale may also reduce a company’s variable costs per unit because of operational efficiencies and synergies.

Detailed explanation-2: -External economies of scale boost output levels of all firms in a particular industry, and consequently, encourage the growth of supporting industries, that is, industries that provide raw materials, equipment, and transportation services.

Detailed explanation-3: -Technical progress leads to development of machine at low price is example of external economies of scale.

Detailed explanation-4: -Internal and External Economies of Scale: An Overview Internal economies of scale are firm-specific-or caused internally-while external economies of scale occur based on larger changes outside the firm. Both result in declining marginal costs of production, yet the net effect is the same.

Detailed explanation-5: -External economies of scale occur when the cost per unit depends on the size of the industry but not necessarily on the size of any one firm. Internal economies of scale occur when the cost per unit depends on the size of an individual firm but not necessar-ily on that of the industry.