[amp_mcq option1=”Discount on purchases of raw materials” option2=”Technical progress leads to development of machine at low price” option3=”Hiring of specialized staff due to increase in scale of production” option4=”A firm starts producing by-products” correct=”option1″]
The correct answer is: A. Discount on purchases of raw materials.
External economies of scale are cost reductions that a firm experiences as the industry as a whole expands. This can happen for a number of reasons, such as when suppliers offer discounts to firms that purchase large quantities of raw materials, or when there is a pool of skilled workers who are available to work for any firm in the industry.
Option B is an example of internal economies of scale, which are cost reductions that a firm experiences as it expands its own production. Option C is an example of a firm increasing its scope of production, which is not the same as increasing its scale of production. Option D is an example of a firm diversifying its product offerings, which is also not the same as increasing its scale of production.