The existence of internal economies of scale
A) may be associated with a perfectly competitive industry.
B) is associated only with sophisticated products such as aircraft.
C) cannot be associated with a perfectly competitive industry.
D) cannot form the basis for international trade.
E) focuses more on the industry than individual firms.

Question

Quizplus · Accepted Answer

Internal economies of scale refer to cost savings that are achieved by individual firms as they increase production, leading to a decrease in the average cost of production. In a perfectly competitive industry, no single firm has the ability to influence the price of the product or service, and firms are price takers. As a result, there is no scope for individual firms to increase production and reap the benefits of internal economies of scale. Therefore, the existence of internal economies of scale cannot be associated with a perfectly competitive industry.

The Existence of Internal Economies of Scale