External Economies of Scale in Agriculture

Steps:

• Identify the event: Improvement in transport infrastructure benefits farming by lowering costs.
• Classify the benefit: This is an external factor affecting multiple firms, not controlled by any single farm.
• Link to economies of scale: Reduced transport costs lower production expenses industry-wide, increasing efficiency as output grows.
• Match to options: This fits external economies, where societal improvements aid all producers.

Why B is correct:

• External economies of scale occur when industry-wide factors, like better infrastructure, reduce average costs for all firms, as defined in microeconomics.

Why the others are wrong:

• A: External diseconomies increase costs due to industry growth, like congestion, opposite of cost reduction.
• C: Internal diseconomies are firm-specific cost rises from expansion, such as management issues, not infrastructure.
• D: Internal economies are cost savings from a single firm's growth, like specialization, not shared external benefits.

Final answer: B