By P. W. S. Andrews, Elizabeth Brunner (auth.)
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The small firm is less likely to worry about keeping ahead technically, and may rely on getting the results of the big firm's research without doing its own. Moreover, the major economies of scale go with size of plant, and there will be much less disparity between sizes of plant than between sizes of firm. The large firm cannot extend a plant indefinitely in one area, because of pressures on the labour supply for one thing, and so is inevitably multi-plant. This may bring management complications and pressures from trade unions, to which smaller :ilims are less subject.
Milk containers) one or the other industry may have such a comparative advantage as to exclude the other industries from competition; a large firm producing both glass and tin containers I would analyse as being in two separate industries. Let us consider by-product production; I would say that the producers of by-product sulphate of ammonia are not in the same industry as the producers of synthetic ammonia although they are in the same product market; this is because the by-product producers are coke-oven plants which produce ammonia incidentally, there is no cost of production in any normal sense (though there woUld be a cost of disposal of the poisonous ammonia if it were not flXed in the form of sulphate), and the supply is determined by the demand for coke.
Mal-cost/price compatibility of diverse commodities issuing from the same basic production processes will mean that we need not regard this as an unduly restrictive limitation on the scope of the cost curve. In practice, one can move fairly freely from analysis of individual costings to consideration of the broad process costs which characterise firms, and so to available cost statistics. I have said that the model is concerned with manufacturers' prices strictly only in the market at point of manufacture.
Studies in Pricing by P. W. S. Andrews, Elizabeth Brunner (auth.)