ABSTRACT
One of the chief factors in the profits of any firm is the scale of production. Though everyone has a fairly dis tinct idea of what is meant by production on a large and small scale respectively, it is rather difficult to clearly define these terms. There is, of course, no sharp division between large and small scale production any more than there is between hot and cold water ; the terms are comparative. But how shall we judge whether a firm’s operations are on a comparatively large or small scale ? By the size of the factory, by the amount of capital sunk in the concern, by the number of employees, by the output in terms of money, or by the output in terms of quantity (for instance, so many thousand bales of cloth per annum) ? As a matter of fact it will probably not make much difference which method we employ if we are comparing firms within the same industry, and it is not possible to compare firms in different industries from the point of view of the scale of production ; it is not even possible on different branches of the same industry. For instance, the acreage of a very large arable farm would be very small for a sheep farm, and the acreage of a small arable farm would be very large for a market garden. The scale of production in agricul ture is always measured by the area of the land.
