The existence of external economies of scale
A) tends to result in large profits for each firm.
B) may be associated with a perfectly competitive industry.
C) cannot be associated with a perfectly competitive industry.
D) tends to result in one huge monopoly.
E) focuses more on individual firms than the industry as a whole.

Question

Quizplus · Accepted Answer

External economies of scale refer to benefits that result from the growth of the industry as a whole rather than the individual firm. Such benefits may include better infrastructure, access to skilled labor and suppliers, and the growth of a specialized workforce. These benefits are more likely to be present in a perfectly competitive industry, where multiple firms are competing for market share and are leading to the growth of the industry. Therefore, external economies of scale can be associated with a perfectly competitive industry.

The Existence of External Economies of Scale