Hi Can anyone solve this question Its one question only I p

Hi, Can anyone solve this question ?. Its one question only. I posted the question second time as the figures are more clear in the second question.

2. Shortly explain the following two figures on the economic effect of external economies of scale as agglomeration forces Price, cost (per unit) Price, cost (per unit) P: AC oreign Dicceg Domestic production Foreign production

Solution

The agglomoration effect has resulted in increasing returns to scale i.e. as input increases output increases more than the output thus lowering the cost of production per unit. The AC decreases with increasing the production. Thus average cost decreases for the firm and the profit level increases. .