Scale of Production

Scale of Production

Qs. Distinguish between internal economics and external economics how do they arise?
Scale of production means size of plant, the number of plants and the technique of production adopted by the producer
Scale of production are
1. Small Scale Production
2. Large Scale Production
Economics of large scale production can be grouped as
A. Internal Economics
B. External Economics
A. Internal Economics
The Internal Economics arise within a firm as a result of its own expansion, independent of the size and expention of the industry.
OR
Internal economics are those economics in production those reduction in cost which occur by firm itself when it expand its output or enlarge the scale of production
Internal Economics have following types.
1. Technical Economics
2. Risk-Bearing Economics
3. Managerial Economics
4. Commercial Economics
5. Financial Economics
1. Technical Economics
They arise when production is carted on a large scale, a firm can afford to install uptodate and costly matching and have its own repairing arrangements. As result cost percent is decrease due to large scale of production from the new set up. Like for e.g. A bigger butter or a bigger finance, cloth, embroidery machine.
2. Risk-Bearing Economics
Some of huge firms take the big risk on manufacturing by taking the supply on credit. These are said risk bearing Economics.
These Economics make the average cost curve a downward sloping curve as the level of output increased.
B. External Economics
As a result of expension in industry size as whole the member of firm get benefits these are said to be external economics. Some types of external economics are
1. Economics of Concentration
2. Economics of Information
3. Economics of Disintegration
1. Economics of Concentration
These are the advantages of local industry when a firm have skilled worker they got better transport and other benefits. Those firms get these Economics.
2. Economics of Information
Publication of Technical Journals and Central research Institute will the engagement of all firm make Economics of Information.
3. Economics of Disintegration
When an Industry grow it split there some process to Specialized department like for e.g. A number of cotton mills located in a particular area may have also the benefits of making plant.