Economics of scale exist when the average production cost per unit decreases as the scale of production increases. There are two types of economies of scale: internal and external. Internal economies of scale provide cost advantages to individual firms from factors like specialization, bulk purchasing discounts, and risk diversification as the firm increases production. External economies accrue to firms from industry-wide factors like an increased skilled labor pool and infrastructure as the overall industry scale increases. However, both internal and external diseconomies can occur when scale increases beyond optimal levels, driving up costs through issues like unwieldy management, technical difficulties, and limits to industry expansion.

1. Economics of scale Presented by:- Mahesh Gupta