Answer to Question #153829 in Economics for priya jaggernauth

Question

Explain two internal benefits that a firm receives from expanding production in the long run.

Answer 1

Internal economies which accrue to a firm when it expands are caused by two factors: indivisibility, and specialisation.

As output increases, the indivisible factors (such fixed factors as capital) which were being used below capacity can be utilised to their full capacity thereby reducing costs.

Division of labour which leads to specialisation is another cause of internal economies.