Internal economies of scale is how efficient a firm is at producing; they are those economies of scale which a firm has direct control over. They relate to the change in average production cost for a firm as it increases its total output. As output increases, the average cost per unit will fall until the firm reaches its minimum efficient scale, where the firm has maximized its efficiency in production and any additional unit will cause the average cost to rise. In such, a firm in a competitive market will hypothetically produce at its Minimum Efficient Scale (MES); a point where its long run average total cost is the lowest.
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