By definition, economies of scale refers to the situation where long run average costs decline as the firm expands its use for all its inputs. Therefore, the company should take into consideration the economies of scale of increasing robotic automation equipment in an existing facility.
The initial cost of the current facility will play no part in the decision to increase robotic automation equipment in an existing facility because the initial cost of the current facility is a sunk cost. That is, it is a cost that has already been paid and can no longer be avoided. As a result, sunk costs are not used as a consideration in future endeavors of the company.
An opportunity cost is the measure of benefits lost due to using resources for a given purpose. All decisions look at opportunity costs to measure the best use of resources.
Technological efficiency, otherwise known as productive efficiency, states that the allocation of resources is efficient so long as there can be no further reallocation of these resources that would permit more of one good to be produced without reducing the output of some other good. Thus, allocation of inputs would be inefficient if there were another, better, way to reallocate the inputs to get more of one good and no less of the other good. Thus, this decision of increasing robotic automation equipment is onedealing with inputs and therefore these inputs need to be technologically efficient.
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