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External economies of scale result from an increase in the productivity of an entire industry, region, or economy due to factors outside of an individual company. There are three sources of external economies of scale: input sharing, labor market pooling, and knowledge spillovers (Marshall, 1920). [1] Localization economies occur when an ...
Economies of scale external to a firm result from spatial proximity and are called agglomeration economies of scale. Agglomeration economies can be seen as the external condition for companies and the internal condition for the region. Increasing returns to scale, according to Beckmann, is integral to understanding why urban centers form.
External economies of scale tend to be more prevalent than internal economies of scale. [44] Through the external economies of scale, the entry of new firms benefits all existing competitors as it creates greater competition and also reduces the average cost for all firms as opposed to internal economies of scale which only allows benefits to ...
The concept of diseconomies of scale is the opposite of economies of scale. It occurs when economies of scale become dysfunctional for a firm. [1] In business, diseconomies of scale [2] are the features that lead to an increase in average costs as a business grows beyond a certain size.
For these reasons and sometimes due to economies of scale, they can sometimes out-compete similar businesses in developing countries. This is a substantial issue in international agriculture, where Western farms tend to be large and highly productive due to agricultural machinery , fertilizer, and pesticides; but developing-country farms tend ...
Economic sociology is the study of the social cause and effect of various economic phenomena. The field can be broadly divided into a classical period and a contemporary one, known as "new economic sociology".
For example, Apple may run an ad on Facebook which Facebook gets compensated for and Apple will inevitably make more money from these ad's due to subconscious reinforcement of the product. Thus, these tech firms that cluster produce economies of agglomeration which is beneficial to most firms in the cluster due to the boost in productivity
In other words, returns to scale analysis is a long-term theory because a company can only change the scale of production in the long run by changing factors of production, such as building new facilities, investing in new machinery, or improving technology.