“Scale of production refers to size of plants, the number of installed plants and the techniques of production adopted by the producer”.
The scale of production is classified into following three types:
(i) Small Scale Production.
(ii) Large Scale Production.
(iii) Optimum Scale Production.
(i) Small Scale Production: If a firm produces goods with small sized plants, the scale of production is said to be small scale production. Small scale of production is associated with low capital output and capital labor ratios. In small scale of production, the economies of scale do not occur to the firm.
(ii) Large Scale Production: If a firm uses more capital and larger quantities of other factors, it is said to be operating on large scale production. Large scale production enjoys both internal and external economies of scale.
(iii) Optimum Scale Production: The optimum scale of production refers to that size of production which is accompanied by maximum net economics of scale, it is a scale at which the cost of production per unit is the lowest.