The traditional treatment of economies of scale ignores the complexity of manufacturing processes and is inadequate for an analysis of the impact of technological change. Complexity in manufacturing processes results, inter alia, from the multi-product capabilities of production facilities and the need to control the production of several outputs. This aspect of production activity must be addressed if the economics of diffusion of microelectronics-based technologies is to be studied.
This paper examines the sensitivity of cost functions to changes in the characteristics and utilisation of production facilities and discusses the impact of microelectronics on scale, scope and scheduling flexibility of manufacturing facilities.
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