chapter  6
24 Pages

Economies of Scale

Actually, internal economies of both a static and a dynamic character contribute to the so-called economies of scale. Their discussion is included in Part II of this study, however, by reason of our emphasis on dynamic elements in the case of economic integration. Scale economies will be considered under two headings: economies internal to the plant and economies internal to the firm and external to the plant. Only the "real" economies of scale, i.e., those which entail a reduction of input needs per unit of output, will be examined. Cost reductions for the plant (firm) that are not associated with any real saving for the economy as a whole (e.g., lower prices paid to suppliers by reason of the increased bargaining power of the large firm) fall outside our topic.