Factors that limit the size of the firm.
Factors that limit the size of the firm.- As we have seen, the size of the firm may be described as small, medium or large.- Small firms may be unable to expand due to the following limiting factors:(a) Size of the market for the product produced or provided: A smallmarket tends to keep a firm small. There is, therefore, a strong relationship between a firm and the size of the market which it serves.(b) Availability of factors of production: Even if circumstances necessary for the expansion of a given firm were favourable,without the requisite factors of production, the firm is unlikely to grow to take advantage of the favourable circumstances.(c) Nature of product produced or provided: Most services such as medical care, hairdressing and legalpractice are more effectively provided on a small scale.(d) Owner’s decision: Some firm owners, fearing the inconveniences of operating a business on large scale, would prefer the simplicity and uncomplicatedrunning of the small-scale firms.