Final answer:
Improvements in infrastructure as external economies of scale refer to benefits for an industry through better transportation, communication, and utilities. These can reduce costs for firms regionally and facilitate economic development. They allow industries to reap the benefits of economies of scale and enhanced competition.
Step-by-step explanation:
Improvements in infrastructure, as a form of external economies of scale, specifically refer to the benefits gained by an industry as a whole through enhanced transportation, communication, and utilities. When infrastructure is improved, it facilitates the exchange of goods and services, which, in turn, fosters economic development. Cost savings arise not just from efficient production processes or increases in the volume of goods produced, but also from the shared benefits that industries experience from improved roads, ports, telecommunication systems, and other public utilities. These improvements can reduce costs for all firms in an area, leading to a decrease in average costs and an increase in competitive advantage on a larger scale.
For example, if a new highway is built, it would reduce transportation time and costs not only for one company but for all companies in that region. Similarly, advancements in technology or telecommunication infrastructure can lead to better communication and productivity. These improvements are critical for international and inter-state trade, allowing companies to leverage the advantages of economies of scale and competition, thus offering a variety of products to customers at lower costs.