Which of the following is example of external economies of scale?

Discount on purchases of raw materials
Technical progress leads to development of machine at low price
Hiring of specialized staff due to increase in scale of production
A firm starts producing by-products

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.

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