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I am currently studying international economics and I'm going over economies of scale, I get the concept, but there is an example in my textbook that I don't understand.

Here is a screenshot for context. enter image description here

I don't get the last example about tanks and pipes, I understand they are also internal scale economies, but I don't know what they mean by surface area or volume, wouldn't their contribution to output be quantity produce like the airplane example? or is it refering to something else?

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  • $\begingroup$ Is screenshoting the text better in some way than copying the text and quoting it? The latter seems to take less space and is searchable. $\endgroup$
    – Giskard
    Commented Feb 25 at 14:33

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The surface area of a pipe with length $l$ and radius $r$ is $l2r\pi$. This is approximately proportional to how much material you need to make the pipe,1 so it is proportional to the cost of the pipe.

If we assume a constant flow speed $v$, the amount of liquid flowing through the pipe is proportional to $vr^2\pi$. In this formula $r$ is squared. Thus if we double the radius of the pipe, costs are doubled, but flowthrough/liquid carrying capacity is quadrupled, making the internal economics to scale increasing.


1Until some critical size is reached where the pipe breaks under the weight it carries.

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