Scale of Production?
"Scale of production is set by the
size of plant, the number of plants installed and the technique
of production adopted by the producer".
The scale of production is
classified as under:
(i) Small Scale Production.
Large Scale Production.
(iii) Optimum Scale of Production.
Scale Production: If a firm produces
goods with small sized
plants, the scale of production is
said to be small scale production. Small scale of production is associated with
low capital output and capital labor ratios. In small scale of
production, the economies of scale do not occur to the firm.
(ii) Large Scale of Production:
If a firm uses more capital and larger quantities of other
factors, it is said to be operating on large scale production. Large scale
production enjoys both internal and external economies of scale.
(iii) Optimum Scale
of Production. The optimum scale of
production refers to that
size of production which is
accompanied by maximum net economics of scale, it is a scale at
which the cost of production per unit is the lowest.