External economies of scale can occur when
A) an industry's firms become more dispersed.
B) there is a decrease in specialized workers.
C) firms seek out consultants for technical knowledge.
D) knowledge of production technology spreads through direct contacts.

Question

Quizplus · Accepted Answer

External economies of scale occur when knowledge of production technology spreads through direct contacts, leading to more efficient and productive production processes. This can occur through the sharing of information, expertise, and resources among firms in the same industry or geographic region. Firms may also benefit from a larger pool of specialized workers, which can be attracted to the region due to the presence of other firms in the same industry. However, external economies of scale do not occur when an industry's firms become more dispersed, and it is unlikely that firms would seek out consultants for technical knowledge as a source of external economies of scale.

External Economies of Scale Can Occur When