Question

If there are internal economies of scale, why would it ever make sense for a firm to produce the same good in more than one production facility?

Answer 1

It make sense for afirm to produce the same good in more than one production facility because cost per unit of producing good will decrease as they will produce more and more quantity of goods. This firm is experiencing internal economies of scale which enables to expanf the production of goods in the economy.Internal economies of scale arise when the cost of producing an item that your business sells decreases as the size of your business expands. That is, as a company grows larger and larger, overall expenses are bound to increase.

Firm can maximise its profits by producing more qanutity of goods in the long run.Internal economies of scale, on the other hand, apply to an individual business. An increase in the overall size of operation – more staff, more facilities, more equipment and larger purchasing orders – can, under the right circumstances, lead to lower per-unit production costs.