Final answer:
The correct option is C). Technological progress as a form of external economies of scale refers to cost reductions across an industry due to advancements in technology. These savings are realized by multiple firms and differ from internal economies which are contained within a single firm. The ability to produce at a lower average cost is what allows large-scale companies to offer competitive pricing.
Step-by-step explanation:
Technological progress, as a form of external economies of scale, refers to the benefits gained by an industry as a whole through advancements in technology. This type of economic efficiency is realized when technological advancements lead to a reduction in average costs across an industry, rather than just within a single organization. This is because technological improvements often benefit multiple firms within the same industry. For example, a new software that increases efficiency in production can be used by several factories, leading to widespread cost savings.
It is important to distinguish external economies of scale from internal economies of scale, which are cost reductions that occur within an individual firm as it increases output. External economies, however, accrue due to factors outside a firm, such as technology improvements, and impact an industry. Large firms are capable of producing at a lower average cost than smaller ones, which is why companies like Costco or Walmart are able to offer lower prices due to their scale of production.
The advantages of economies of scale are not only limited to lower production costs but also include the benefits of competition and variety to customers. This competition can extend across international borders, allowing states and countries to benefit from trading with one another, while access to better technology can improve production methods and drive costs down.