Internal economy of scales
1). An internal economy of scale measures a company's efficiency of production. That efficiency is attained as the company improves output when the average cost per product drops. This type of economy of scale is a consequence of a company's size and is controlled by its management teams such as workforce, production measures, and machinery. The factors, therefore, are independent of the entire industry.
2). There are several different kinds of internal economies of scale. Technical economies of scale are achieved through the use of large-scale capital machines or production processes. The classic example of a technical internal economy of scale is Henry Ford's assembly line.2
3).Another type occurs when firms purchase in bulk and receive discounts for their large purchases or a lower cost per unit of input. Cuts in administrative costs can cause marginal productivity to decline, resulting in economies of scale.
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