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Production, Costs & Revenue (Economies & Diseconomies of Scale…

- - - - Main Types of Technical Economies of Scale:
        
        Indivisibilities - Many types of plant or machinery are indivisible in the sense that there is a certain minimum size below which they cannot efficiently operate
        
        The Spread of research and development costs - With large plants, research and development costs can be spread over a much longer production run, reducing unit costs in the long run
        
        Volume Economies - With many types of capital equipment, costs increase less rapidly than capacity. When a storage tank or boiler is doubled in dimension, its storage capacity increases eight-fold. Volume economies are important in industries such as transport, storage and warehousing, as well as in metal and chemical industries where an increase in the scale of plant provides scope for the conservation of heat and energy
        
        Economies of massed resources - The operation of a number of identical machines in a large plant means that proportionately fewer spare parts need to be kept than when fewer machines are involved
        
        Economies of vertically linked processes - Much manufacturing activity involves a large number of vertically related tasks and processes, from the initial purchase of raw materials, components and energy through to the completion and sale of the finished product. The linking of processes in a single plant can lead o saving in time, transport costs and energy