External Economies

External Economies

External Economies, the economies of scale that result from the growth of an industry or from industry in general. They are a result of increasing size and its increased division of labour (specialization) and better use of large indivisible factors of production.

In a highly industrialized country all firms benefit from well organized and efficient transport services, from a stable monetary system and from other specialized services. Similarly the growth of an industry can produce economies of scale for its firms. Thus, the growth of manufacturing industries leads to the development of the machinery industries and all manufacturing enterprise can use their specialist goods and services. As the motor industry grew, rubber manufacturers specialized in the production of tyres, which are supplied to all motor firms. Frequently the expansion of industry in an area leads to the emergence of a skilled labour force, and all firms within the industry benefit.

Face Value, or nominal value, the value stated on the face of a security as distinguished from the market value. It represents the amount at which a security is due t0 be redeemed or repaid when it matures.

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