ECONOMIC AND DISECONOMIC SCALES IN AQUACULTURE

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ECONOMIC AND DISECONOMIC SCALES IN AQUACULTURE

  1. 1. ECONOMIES ANDDISECONOMIES OF SCALE IN AQUACULTURE NIMNAGA.K MSC IF
  2. 2. ECONOMIES OF SCALE
  3. 3. • Economies of scale is a long run concept and refers to reductions in unit cost as the size of the facility and the usage levels of other inputs increase• Refers to the cost advantages that an enterprise obtains due to expansion
  4. 4. Common sources are….• Purchasing: bulk buying of materials through long-term contracts• Financial: obtaining lower interest charges when borrowing from banks• Managerial: increasing the specialization of managers
  5. 5. Common sources are….• Marketing: spreading the cost of advertising over a greater range of output• Technological: taking advantage of returns to scale in the production function• Learning by doing
  6. 6. Economies of scale in aquaculture businesscan result from the adoption of larger piecesof equipment or more advanced technologies
  7. 7. Economies of scale and Returns to scaleEconomies of scale Returns to scale• Refer to a firm’s costs • Describe the relationship between inputs and outputs in a long-run production function
  8. 8. Returns to scale• Constant• increasing• Decreasing
  9. 9. If the firm is a perfect competitor in all input markets, and thus the per- unit prices of all its inputsare unaffected by how much of the inputs the firm purchases , then…
  10. 10. • Economies of scale if and only if it has increasing returns to scale the • Diseconomies of scale if and only if it has decreasing returnsfirm to scalehas… • Neither economies nor diseconomies of scale if it has a constant returns to scale
  11. 11. DISECONOMIES OF SCALE
  12. 12. A firm that increases its scale of operation to apoint where it encounters rising long run average costs is said to be experiencing internal diseconomies of scale The concept is the opposite of economies of scale
  13. 13. Causes for diseconomies of scale• Office politics• Top-heavy companies• Duplication of effort• Communication costs

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