The existence of internal economies of scale
A) cannot be associated with a perfectly competitive industry.
B) may be associated with a perfectly competitive industry.
C) is associated only with sophisticated products such as aircraft.
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 advantages that a firm experiences as it increases its output. In a perfectly competitive industry, firms are price takers and cannot influence prices, which is inconsistent with the cost advantages and market power associated with internal economies of scale.

The Existence of Internal Economies of Scale