Economies of scale describe how cost changes with output as the firm moves along an expansion path as it minimizes long-run cost. They are the same only when the expansion path coincides with a ray in input space. 11.15 Economies of scale describe how cost changes in the long run when the firm increases one output. Economies of scope describe the case in which the total cost of producing two or more goods at the same time is less than the sum of the costs of producing those goods using separate production processes. 11.16 Internal economies describe the behavior of costs in the long run when input prices remain constant.
External economies describe the behavior of costs in the long run when input prices change.
11.17 Firm A has a greater difficulty in substituting inputs, and so its costs will increase more when the price of any input increases. 11.18 Even nonprofit organizations have to worry about the costs of production and the efficient use of inputs, because they wish to avoid losing money. 11.19 Long run planning is crucial in any competitive environment if the firm is to remain in the industry. 11.20 Economies of scale imply decreasing long-run average costs. As firms increase their scale of operations to take advantage of the economies of scale, the industry will not support as many firms.