Economies of scale

Complete the paragraph below on economies of scale by filling in the blank spaces. Large firms can usually produce goods more cheaply than small firms. The size of a firm has an important effect on the average costs of production. As a firm increases its size, average costs start to fall. This is because of economies of scale. There are internal and external economies of scale. Internal economies of scale are the cost benefits that an individual firm can enjoy when it grows. External economies of scale are cost benefits that all firms in an industry can enjoy when the industry expands. However, diseconomies of scale occur when the average costs of production increase as a firm becomes too big. Economies of Scale graph You are to label the graph in terms of: The name of the line shown Where economies of scale exist Where diseconomies of scale exist Long Run Average Cost (LRAC) Economies of scale Economies of scale Most efficient economies of scale Diseconomies of scale Diseconomies of scale