Q. Illustrate Internal Economies of Scale?

Internal economies of scale are the benefits of large scale production. They are enjoyed by the firm when it increases its scale of production. They accrue to the firm from their own actions. They affect the shape of long-run average cost curve. They are responsible for increasing returns to scale. According to many economists, internal economies arise because of indivisibility of some factors. As the output increases the large indivisible factors can be employed more efficiently and, hence, firm experiences increasing returns to scale. Internal economies of scale are categorized into two, as displayed in the chart below:

Figure: Chart representing Internal Economics of Scale