Explanation

(a) Small scale production involves small capital outlay and therefore results in low level of output. On the other hand, large scale production involves a large scale capital outlay and therefore results in high level of output.

(b)Some of the internal economies of large scale production are :
(i) technical economies: a large firm has the advantage in the use of factor inputs which results in lower cost per unit of output.
(ii) financial economies: a large scale producer can borrow money from financial institutions at lower interest rate because it can offer better collateral security.
(iii) marketing economies: a large firm can buy inputs in bulk and possibly at discounts. It can also pay less on transportation and advertisement which result in lower operating cost.
(iv) managerial economies: when output is increasing, managerial cost increases at a slower rate. Number of managerial staff may increase with output. OR As output increases, specialists can be employed to take charge of the various processes e.g. marketing.
(v) risk-bearing economies: a large firm is able to bear losses arising from its operations as it can provide insurance coverage. OR It can also diversify its product and its market.
(vi) welfare economies: a large firm can provide better conditions of service which may enhance the level of productivity and also attract highly qualified manpower.
(vii) research economies: a large firm can invest huge amount on research and thereby experience technical progress. 

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