Explain internal & external economies of scale

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Explain internal & external economies of scale

Economics - Financial Markets
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At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.

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Internal economies of scale refer to the efficiency of production within in a firm. An example of this is that as an apple company becomes too large, the marginal cost of hiring another apple picker is more than the profit that the new laborer could bring in. Bureaucracy, divisions of power, and over production are examples of what causes internal dis-economies of scale. External economies of scale refer to the entire industry that a company is in. This refers to how many companies are in competition, the similarity of products, and the pricing range of companies. When there are too little or too many companies in competition, the market equilibrium is not the most efficient outcome.

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