These are associated with fixed capital, which includes machinery and equipment. Such economies arise because of the following
iv)Specialized equipment. The production methods become more mechanized as the output scale increases. This would imply more specialized capital equipment and lower variable costs.
(v) Indivisibility. The machinery and equipment generally have the property of indivisibility, which means that equipment is available only in minimum sizes or in definite ranges of size. When output is increased from zero to the maximum capacity level of the machine, the same machine and equipment are used. As a result the cost of machine is shared between more and more units of output. In short, as the output is increased, the machinery and equipment comes to be utilized more intensively and consequently the cost of production per unit declines.
(vi) Integration of processes. The large size firms enjoy economies of large machines. Integration of processes occurs where one large automatic transfer or numerically controlled machine can carry out a series of consecutive processes, saving labor cost and time required to set up the work on each of a series of successive specialized machines.
(vii) Economies of increased dimensions for many types of equipment both initial and running costs increase less rapidly than capacity (e.g., tanks, blast furnaces and other static and mobile containers). These result in economies of increased dimensions. Any container whose external dimensions are doubled has its volume increased eight times, but the area of its surface walls would have increased only four times. This reduces material costs and, where appropriate, heat loss and surface, air and water resistance per unit.
(viii) Economies in set-up costs. The larger the scale of output, the more a multipurpose machinery is left to one set-up and, therefore, set-up costs of general purpose machines reduce.
iv)Specialized equipment. The production methods become more mechanized as the output scale increases. This would imply more specialized capital equipment and lower variable costs.
(v) Indivisibility. The machinery and equipment generally have the property of indivisibility, which means that equipment is available only in minimum sizes or in definite ranges of size. When output is increased from zero to the maximum capacity level of the machine, the same machine and equipment are used. As a result the cost of machine is shared between more and more units of output. In short, as the output is increased, the machinery and equipment comes to be utilized more intensively and consequently the cost of production per unit declines.
(vi) Integration of processes. The large size firms enjoy economies of large machines. Integration of processes occurs where one large automatic transfer or numerically controlled machine can carry out a series of consecutive processes, saving labor cost and time required to set up the work on each of a series of successive specialized machines.
(vii) Economies of increased dimensions for many types of equipment both initial and running costs increase less rapidly than capacity (e.g., tanks, blast furnaces and other static and mobile containers). These result in economies of increased dimensions. Any container whose external dimensions are doubled has its volume increased eight times, but the area of its surface walls would have increased only four times. This reduces material costs and, where appropriate, heat loss and surface, air and water resistance per unit.
(viii) Economies in set-up costs. The larger the scale of output, the more a multipurpose machinery is left to one set-up and, therefore, set-up costs of general purpose machines reduce.
