Full text: Small and Big Business

In the lower size 'geeaips* the increase is general and can 
easily he explained hy the fact that with increasing size 
hiring is replaced hy ownership of buildings, shops, plantj 
premises etc. oust as purchase of transport services etc. is 
sometimes replaced hy ownership of the means of production. 
By stretching the term a little, all this can also he regarded 
as vertical integration. 
As far as production technique as such is concerned there is 
now a large amount of evidence, especially engineering data, 
to show that with increasing scale of production the capital- 
coefficient decreases^} In fact oaly application 
of the principle of large scale economies which operates in 
the production of the equipment no less than in its operation, 
and frequently even more so. Hore particularly, it is due to 
the “economies of dimension "s If the surface area of^con 
tainer &isai (related to the cost) increases with the square 
of a certain factor,the volume (related to capacity) increases 
with the cube of this factor. As a consequence the cost of 
» equipment K is given hy 
K. » a x b 
2 )por example B. jWeintrauh; Effects of Current and Prospective 
Technological Developments upon Capital Formation. American 
Economic Review, Supplement, March 1959* 
J.S, Bain: Barriers to New Competition. Cambridge Mass. 1956. 
C.F. Pratton: Economies of Scale in Manufacturing Industry. 
Cambridge University Press, 1971. I 
J, Haldi and D. Whitcomb.; Economies of Scale in Industrial I 
Plants. The Journal of Political Economy. Aug. 1967* 1 

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