**Explanation:**

**Increasing returns to scale** refers to the phenomenon where an increase in the scale of production leads to a more than proportionate increase in output. In other words, it occurs when a company increases its inputs (such as labor, capital, and resources) and experiences a greater increase in output.

The explanation for increasing returns to scale can be understood in terms of **external and internal economies**.

**A. External economies:** These refer to the benefits that a firm derives from factors outside of its control but within the industry or region in which it operates. External economies can lead to increasing returns to scale because they result in cost savings or productivity improvements for all firms in the industry.

Examples of external economies include:

1. **Infrastructure**: The presence of well-developed infrastructure, such as roads, ports, and telecommunications, benefits all firms in the industry by reducing transportation costs and improving connectivity.
2. **Skilled labor**: When an industry cluster develops in a specific region, it attracts a pool of skilled labor. This availability of skilled labor benefits all firms by reducing recruitment and training costs.
3. **Knowledge spillovers**: Proximity to other firms and research institutions facilitates the sharing of knowledge and innovation, leading to productivity gains for all firms in the industry.

These external economies result in cost reductions and efficiency improvements, which contribute to increasing returns to scale.

**B. Internal economies:** These refer to the benefits that a firm derives from its own internal operations and decisions. Internal economies arise from factors that a firm can control, such as production techniques, specialization, and economies of scale.

Examples of internal economies include:

1. **Specialization**: As a firm grows, it can divide its operations into specialized departments or divisions. This specialization leads to greater efficiency and productivity gains.
2. **Economies of scale**: Larger firms can take advantage of economies of scale, where the cost per unit of output decreases as the scale of production increases. This can be due to bulk purchasing, better utilization of resources, or spreading fixed costs over a larger output.

Internal economies contribute to increasing returns to scale by allowing firms to produce more output with relatively fewer resources and at lower costs.

**Conclusion:**

In conclusion, increasing returns to scale can be explained in terms of both external and internal economies. External economies arise from factors outside of a firm's control but within the industry or region, while internal economies result from a firm's own internal operations and decisions. Both types of economies contribute to cost savings, productivity improvements, and ultimately, increasing returns to scale. The correct answer to the question is **A: External and internal economies**.