The main objective of the firm is to maximize profit. For this it has to determine the optimum level of production which can be large or small. If firm decided to produce large number of out it has to produce on a large scale and vice versa.

Determinants of Scale of Production:

Financial Resources

The first and foremost factor is to determine the finance requirement and availability. To go for large scale obviously large finance is required.

Production Technique

To determine the scale of production obviously production techniques and technology also count. Sophisticated machines and equipments are required to carry production on large scale.

Means of communication and transportation

This factor is equally as important as any other factor. Because of availability of Raw material and access to market have a significant effect on cast of production.

Extent of the market

This determines the capacity of a market. For large scale it is necessary that Supply for product goes on increasing for a large production.

Entrepreneurial Capabilities

Skill of management and experience also count for scale of production. Large Scale production needs skilled full management to cope all ups and downs of business.