What is economies of scale internal and external?

What is economies of scale internal and external?

Key Takeaways. Internal economies of scale measure a company’s efficiency of production and occur because of factors controlled by its management team. External economies of scale happen because of larger changes within the industry, so when the industry grows, the average costs of business drop.

What are the internal factors of economies of scale?

Internal economies of scale are a result of internal factors such as bulk purchasing, hiring more efficient and highly skilled managers and using advancements in technology to lower production costs.

What are external economies of scale?

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.

What are the 3 external economies of scale?

External economies of scale arise due to one or more of the following factors:

• Economies of concentration. When firms within the same industry cluster together, they can take advantage of the existing infrastructure and supply networks.
• Economies of information.
• Economies of innovation.
• Tax breaks.

What are two types of economies of scale?

As mentioned above, there are two different types of economies of scale. Internal economies are borne from within the company. External ones are based on external factors. Internal economies of scale happen when a company cuts costs internally, so they’re unique to that particular firm.

What is meant by economies of scale?

Economies of scale refers to the phenomenon where the average costs per unit of output decrease with the increase in the scale or magnitude of the output being produced by a firm.

What are the five internal economies of scale?

7 Internal Economies of Scale

• Purchasing economies of scale.
• Financial economies of scale.
• Marketing economies of scale.
• Technical economies of scale.
• Managerial economies of scale.
• Specialization economies of scale.
• Risk-bearing economies of scale.

What are two internal economies of scale?

Types of Internal Economies of Scale Administrative or Managerial Economies. Technical Economies. Marketing Economies or Commercial Economies.

What are the 5 external economies of scale?

Types of External Economies of Scale

• Transportation and Communication.
• Skilled Labour.
• Facility of Workshop.
• Helping Industry.
• Research and Experiment.
• Banking Facility.

What are the forms of internal economies?

Types of Internal Economies of Scale

• Administrative or Managerial Economies.
• Technical Economies.
• Marketing Economies or Commercial Economies.
• Indivisibility.
• Financial Economies.

WHO classified economies of scale into internal and external Mcq?