Abstract
The first purpose of this paper is to specify certain microeconomic determinants of external economies and then analyze the consequences of these economies for production and welfare in a simple general-equilibrium model. The second purpose is to explore the circumstances under which the implied industry production functions are consistent with the ad hoc specifications used in trade theory and growth theory. The motivation for the latter exercise is that, despite progress in general-equilibrium analysis of internal economies, these industry production functions allow the author to capture the very powerful analytical advantages of competitive general-equilibrium and duality theory.
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