Labour Economies: If an firm decides to expand its scale of output, it will be possible for it to reduce the labour costs per unit by practising division of labour. Economies of division of labour arise due to increase in the skill of workers, and the saving of time involved in changing from one operation to the other. Again, in many cases, a large firm may find it economical to have a number of operations performed mechanically rather than manually. These economies will be of great use in firms where the product is complex and the manufacturing processes can be sub-divided.
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