(i) Internal Economies: The internal economies (advantages of large scale production) arise within the firm when it increases its scale production by increasing all inputs. The major internal economies are as follows:

• Technical economies – benefits from capital equipment i.e., machines 
• Managerial economies – reduction in managerial expenses 
• Marketing economies – can manage bulk orders of supply 
• Financial economies – can easily raise finance/loan. 
• Risk bearing economies – can face ups and downs in business. 
• Transport and storage economies – development of transport and warehouse of its own.

(ii) External Economies: These are the benefits which a firm gets when the entire industry is expanded. They accrue to all the firms as a result of expansion in the output of whole industry and they are not dependent on the output level of individual firms. The firms get these economies from outside because of expansion of the industry. The major external economies are as follows: 

•  Low cost of raw materials and capital equipments.
• Technological economies-use of latest techniques of production. 
• Development of skilled labour – trained labour for higher productivity. . 
• Growth of ancillary industry – small scale industries to supply spare parts and use of by-products. 
• Development of Transportation, communication and marketing facilities.

(iii) Diseconomies and Decreasing Returns to scale: The decreasing returns in the production process operate mainly because of diseconomies of large scale production. The firm faces lots of difficulties in managing these roadblocks. When the size of the firm is expanded, its management and supervision becomes, complicated. There are many disadvantages of large scale production which area also known as dis-economies of scale.

There are two types of diseconomies viz., Internal Diseconomies and External Diseconomies of scale. 

(a) Internal Diseconomies: These are the disadvantages.which a firm faces due to expansion of its scale of production. 

They are: 

• Lack of proper coordination among different departments of production process. 
• Lack of control on inputs. 
• Deterioration in communication between various departments. 
• Lack of identification of errors committed.

(b) External Diseconomies: These are the disadvantages which the firms have to face due to expansion in the industry as whole. 

They are: 

•  Increased pressure on transportation – increase in cost of transport.
• Increase in pollution – rise in social cost. 
• Shortage of capital-banks hesitate to finance. 
• The factors of production becoming costly. 
• Increase in business risk and marketing problems.