Question

When new road is constructed as the industry grows in size it is known as

Answer 1

In the process of production a firm enjoys several advantages or experience several disadvantages which are either the result of the scale of operation or due to the location of the firm. The advantages and disadvantages thus experienced are reflected in the cost of production. The average cost of production is favorably affected when a firm starts enjoying economies, whereas the average cost begins to rise when the firms experience diseconomies. Those advantages or disadvantages that accrue to a firm from within, as a result of its scale of operation are summarily referred to as Internal economiesand diseconomies, whereas those advantages or disadvantages which come to the firm from outside and are experienced by the industry as a whole mainly due to localization are referred to as External economies and diseconomiesrespectively.