Question

Distinguish between internal economies and external economies.

Distinguish between internal and external economies of scale.

Differentiate internal and external economies of scale.

Answer 1

Sr. No.	Sr. No.	Internal economies	External economies
1.	Meaning	Internal economies are the cost advantages enjoyed by a single firm when it expands its own scale of production.	External economies are the cost advantages enjoyed by all firms in an industry when the industry as a whole expands.
2.	Scope	They are limited to an individual firm only.	They are shared collectively by all firms in the industry.
3.	Source	They arise from better utilization of resources, specialization, division of labor, and use of improved technology within the firm.	They arise from better utilization of resources, specialization, division of labor, and use of improved technology within the firm.
4.	Cost Reduction	They reduce the cost of production and increase profits for that particular firm.	They reduce the cost of production and improve efficiency for the entire industry.
5.	Example:	A large firm gets bulk discounts on raw materials or can afford advanced machinery.	A large firm gets bulk discounts on raw materials or can afford advanced machinery.