Economies of Scale
Theses are the factors which explain why, as output increase, average costs fall.
There are internal and external economies of scale:
Internal: when one firm grows in size (increases output) and so benefits from lower average costs.
External: when a whole industry grows in size, so a firm within that industry benefits from lower average costs.
The 6 different types of internal Economies of Scale:
1) Risk-bearing:_ as a firm grows larger it is able to spread it's risks over a larger range of products/outlets or factories.
2) Financial:_ as a firm borrows more money, the bank will charge them a lower interest rate as they are more likely to pay the money back.
3) Marketing:_ a firm will increase it's spending on…