External Economies of Scale

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Constant Returns to Scale
When inputs to an industry increase at a certain rate, output increases at the same rate.
Economies of scale
Increasing returns to scale, thus as the industry increases at a certain rate, output increases at a faster rate.
Trade Arising from Economies of Scale
International trade permits each country to produce a limited range of goods by taking advantage without sacrificing variety in consumption.
External Economies of Scale
When cost per unit of output depends on the size of the industry.
Internal Economies of Scale
When cost per unit of output depends on the size of a firm.
Structure of External Economies of Scale
Industries have many small firms that are perfectly competitive. This often occurs by centering the industry around a specific location.
Structure of Internal Economies of Scale
Industries with large firms that have a cost advantage over small ones, causing the industry to become imperfectly competitive.
Benefits of Concentrated Production
1. Access to specialized equipment or services. 2. Labor polling. 3. Knowledge spillovers
Forward-Falling Supply Curve
The larger the industry's output, the lower the price at which firms are willing to sell.
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