External economies of a scale
1)External economies of scale occur when companies benefit from cost reductions due to external factors like industry growth or regional advantages.
2)External Economies of Scale refer to benefits that come from external sources outside the control of the individual firm. Thus, they can lead to lower costs and increased productivity for all firms in the area.
3)External economies of scale refer to economies of scale originating from outside the company, rather than by internal companies. It arises when the average cost for each company goes down as the industry’s output rises.
We can also call it as positive external benefits from the industry expansion. When the whole industry grows bigger, all companies get benefits from a lower long-run average cost.
External economies of scale are essential to promote sectoral growth in certain regions. It explains to us why many companies have production facilities that are close together in a particular industrial area.
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