March 30, 2023

What is external economies of scale?

External economies of scale refer to the cost savings that can be achieved when firms in the same industry or within the same geographic area work together. These savings can come from sharing resources, such as labor, technology, materials, and infrastructure, as well as from benefiting from economies of specialization and learning. By reducing costs and increasing efficiency, external economies of scale help businesses become more competitive and profitable. They can also help create jobs and spur economic development in the local area.