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Economics Test 1. Define and explain all Internal Economies of Scale: * Internal Economies of Scale: Are reductions in long-run average cost as the size and output of a firm increases. In other words, they are advantages that large firms have because they are large. As they grow larger in the long-run they manage to raise their output faster than the rise in their total costs. The result is lower long-run average cost. - Marketing economies - Both in buying materials and selling its finished goods a large firm is n a better position than a smaller one. In buying the products it needs, the large firm often pays less for raw materials, machinery and so on because suppliers are sure they are going to get large orders and do not want to lose a big customer. E.g. A producer of shoelaces will sell its products for £1 per packet to Nike because...

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