Our analysis of production in both the short and long run is clearly of great importance
to our analysis and understanding of the firm. The effect of size upon the costs of production
also has significant implications as regards the number of firms that may
produce efficiently within a given industry. Nevertheless, this does not imply that large
firms always have a productive advantage, as either scale economies might prove to be
relatively insignificant in many industries, or large firms might become less efficient and
bureaucratic with excessive size. It is, of course, the responsibility of management to
promote efficiency in production and provide appropriate managerial organisation.
Our analysis of the conditions for profit maximisation is of particular importance to
our understanding of the firm. In understanding the conditions and variables that determine
the generation of revenue and the incurring of cost, we can achieve a real
understanding of the factors influencing the viability of the firm.