Which one of the following illustrates internal economies of scale?
A firm expands its scale of production and is able to negotiate bulk-buying discounts on raw materials, reducing its average costs.
As an entire industry grows in a region, local colleges set up specialized courses, reducing recruitment costs for all firms.
A firm expands its workforce, resulting in communication breakdowns and an increase in its long-run average costs.
A firm reduces its output in the short run, causing its fixed costs to be spread over fewer units, increasing its average cost.
