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Questions
Distinguish between internal economies and external economies.
Distinguish between internal and external economies of scale.
Differentiate internal and external economies of scale.
Distinguish Between
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Solution
| 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. |
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Notes
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