This
paper explains Alfred Marshall's theory regarding
economies of
scale, which created a distinction between
internal and external economies. The paper explains what is meant by internal and external economies and what factors are responsible for them. The paper then explains why firms tend to benefit from economies of scale and why larger firms are usually in a better position to take advantage of economies of scale. Microsoft is cited as an example of one such firm. In addition, this paper looks at the
concept of
barriers to entry. The concept is defined in the context of competition, and examples are used to illustrate how barriers work.