Question
In which of the following case , the production cost
curves shifts downward?Solution
An economy of scale is a microeconomic term that refers to factors driving production costs down while increasing the volume of output. There are two types of economies of scale: internal and external economies of scale. Internal economies of scale are firm-specific—or caused internally—while external economies of scale occur based on larger changes outside the firm. Both result in declining marginal costs of production, yet the net effect is the same. Production cost curves shift downward due to internal economies of scale, as expansion of the firm leads to technical, managerial, financial, and commercial efficiencies that reduce cost per unit of output.
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