When there are external economies of scale in an industry
A)firm costs decrease as individual firms expand output.
B)firm costs decrease as the industry expands in size.
C)firms will generally increase their size.
D)firms must be located in different regions.

Question

Quizplus · Accepted Answer

External economies of scale occur when the industry as a whole benefits as it grows, such as from shared infrastructure, access to specialized suppliers or labor, or increased knowledge sharing. This means that firm costs decrease as the industry expands in size, rather than just as individual firms expand output. Therefore, choice B is the correct answer.

When There Are External Economies of Scale in an Industry