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94-460: There are communities living around Mount Mabu, the closest being Nangaze, Nvava, and Limbue. The mountain plays a crucial role in the lives of the communities, and in the cosmology of the Nangaze leader, Mount Mabu belongs to a kinship network in which Mabu is the oldest brother, Mount Muriba is the youngest brother and River Mugue is the middle sister. Local narratives state that the first leaders of

188-460: A company gains an added benefit by expanding its size. These economies are due to the presence of some resource or competence that is not fully utilized, or to the existence of specific market positions that create a differential advantage in expanding the size of the firms. That growth economies disappear once the scale size expansion process is completed. For example, a company that owns a supermarket chain benefits from an economy of growth if, opening

282-426: A country becomes more affluent, smallholdings may not be self-sufficient. Still, they may be valued for providing supplemental sustenance, recreation, and general rural lifestyle appreciation (often as hobby farms ). As the sustainable food and local food movements grow in affluent countries, some of these smallholdings are gaining increased economic viability in the developed world as well. Small-scale agriculture

376-449: A crofter's dwelling thereon. A crofter is one who has tenure and use of the land, typically as a tenant farmer , especially in rural areas. Smallholder farms, also known as small-scale farms, encompass a diverse array of agricultural operations, varying from those owning the land they cultivate to those who do not. These farmers, often family-oriented, rely significantly on family labor to meet production needs, with women contributing

470-591: A differentiated demand with respect to the quality of the product, and assistance before and after the sale. Very different organizational forms can therefore co-exist in the same sector of activity, even in the presence of economies of scale, such as, for example, flexible production on a large scale, small-scale flexible production, mass production, industrial production based on rigid technologies associated with flexible organizational systems and traditional artisan production. The considerations regarding economies of scale are therefore important, but not sufficient to explain

564-421: A firm's costs, returns to scale describe the relationship between inputs and outputs in a long-run (all inputs variable) production function. A production function has constant returns to scale if increasing all inputs by some proportion results in output increasing by that same proportion. Returns are decreasing if, say, doubling inputs results in less than double the output, and increasing if more than double

658-421: A high output per worker , some small-scale, sustainable, polyculture farmers can produce more food per acre of land. Small farms have some economic advantages. Farmers support the local economy of their communities. An American study showed that small farms with incomes of $ 100,000 or less spend almost 95 percent of their farm-related expenses within their local communities. The same study took into comparison

752-615: A higher percentage of the retail price , although they will spend more time selling the same amounts of product, which is an opportunity cost . Because smallholding farms frequently require less industrial inputs and can be an important way to improve food security in less-developed contexts, addressing the productivity and financial sustainability of small holders is an international development priority and measured by indicator 2.3 of Sustainable Development Goal 2 . The International Fund for Agricultural Development has an ongoing program for Adaptation for Smallholder Agriculture. During

846-427: A more efficient division of labour. The economies of division of labour derive from the increase in production speed, from the possibility of using specialized personnel and adopting more efficient techniques. An increase in the division of labour inevitably leads to changes in the quality of inputs and outputs. Many administrative and organizational activities are mostly cognitive and, therefore, largely independent of

940-407: A new supermarket, it gets an increase in the price of the land it owns around the new supermarket. The sale of these lands to economic operators, who wish to open shops near the supermarket, allows the company in question to make a profit, making a profit on the revaluation of the value of building land. Overall costs of capital projects are known to be subject to economies of scale. A crude estimate

1034-496: A product X is lower when a single firm instead of two separate firms produce it. See Economies of scope#Economics . Some of the economies of scale recognized in engineering have a physical basis, such as the square–cube law , by which the surface of a vessel increases by the square of the dimensions while the volume increases by the cube. This law has a direct effect on the capital cost of such things as buildings, factories, pipelines, ships and airplanes. In structural engineering,

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1128-646: A range of roles including buying crops, providing seed, and acting as financial institutions. In low-income countries, women make up 43 percent of smallholding agricultural labor but produce 60–80 percent of food crops. In India, there is five sizes classification for smallholders. These are 'marginal' less than 1 hectare ( 2 + 1 ⁄ 2 acres), 'small' between 1 and 2 hectares ( 2 + 1 ⁄ 2 and 5 acres), 'semi medium' between 2 and 4 hectares (5 and 10 acres), 'medium' between 4 and 10 hectares (9.9 and 24.7 acres), 'large' above 10 hectares (25 acres). If we use 4 hectares (10 acres) (marginal + small + medium) as

1222-547: A relationship somewhat similar to the square–cube law. In some productions, an increase in the size of the plant reduces the average variable cost, thanks to the energy savings resulting from the lower dispersion of heat. Economies of increased dimension are often misinterpreted because of the confusion between indivisibility and three-dimensionality of space. This confusion arises from the fact that three-dimensional production elements, such as pipes and ovens, once installed and operating, are always technically indivisible. However,

1316-461: A result, numerous studies have indicated that the procurement volume must be sufficiently high to provide sufficient profits to attract enough suppliers, and provide buyers with enough savings to cover their additional costs. However, Shalev and Asbjornse found, in their research based on 139 reverse auctions conducted in the public sector by public sector buyers, that the higher auction volume, or economies of scale, did not lead to better success of

1410-419: A smallholder or small-scale farm, including factors such as size, food production technique or technology, involvement of family in labor and economic impact. There are an estimated 500 million smallholder farms in developing countries of the world alone, supporting almost two billion people. Smallholdings are usually farms supporting a single family with a mixture of cash crops and subsistence farming . As

1504-837: A substantial portion of farm labor. The agricultural work on smallholder farms predominantly involves family members, with occasional hired labor, particularly during peak seasons. However, the productivity per hectare tends to increase with higher involvement of family members in farm activities. In addition to farm-related duties, women on smallholder farms often shoulder responsibilities such as collecting fuel and water and engaging in low-value, small-scale trading activities. Many smallholder farms supplement their income through off-farm work, crucial for sustaining livelihoods, particularly during agricultural downturns like droughts. Engaging in off-farm employment also serves to build social capital and resilience within these communities. Having multiple sources of income or employment opportunities off

1598-455: A threshold, 94.3% of holdings are small and these constitute 65.2% of all farmland. The bulk of India's hungry and poor people are constituted of smallholder farmers and landless people. 78% country's farmers own less than 2 hectares (5 acres), which constitutes 33% of total farmland but at the same time, they produce 41% of the country's food grains. 20% of the world's poor live in India, although

1692-733: A unit of capacity of many types of equipment, such as electric motors, centrifugal pumps, diesel and gasoline engines, decreases as size increases. Also, the efficiency increases with size. Operating crew size for ships, airplanes, trains, etc., does not increase in direct proportion to capacity. (Operating crew consists of pilots, co-pilots, navigators, etc. and does not include passenger service personnel.) Many aircraft models were significantly lengthened or "stretched" to increase payload. Many manufacturing facilities, especially those making bulk materials like chemicals, refined petroleum products, cement and paper, have labor requirements that are not greatly influenced by changes in plant capacity. This

1786-440: A variety of organizational and business situations and at various levels, such as a production, plant or an entire enterprise. When average costs start falling as output increases, then economies of scale occur. Some economies of scale, such as capital cost of manufacturing facilities and friction loss of transportation and industrial equipment, have a physical or engineering basis . The economic concept dates back to Adam Smith and

1880-445: Is a correlating relationship between a firm's total sales and underlying efficiency. Firms with higher productivity will always outperform a firm with lower productivity which will lead to lower sales. Through trade liberalization, organizations are able to drop their trade costs due to export growth. However, trade liberalization does not account for any tariff reduction or shipping logistics improvement. However, total economies of scale

1974-632: Is a historically contingent fact, and not essential to the nature of such enterprises. In the case of agriculture, for example, Marx calls attention to the sophistical nature of the arguments used to justify the system of concentrated ownership of land: Instead of concentrated private ownership of land, Marx recommends that economies of scale should instead be realized by associations : Alfred Marshall notes that Antoine Augustin Cournot and others have considered "the internal economies [...] apparently without noticing that their premises lead inevitably to

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2068-507: Is a longstanding concern among some segments of the agricultural community. Others view these changes as inevitable, and even necessary to maintain the efficiency and competitiveness of the sector. Farm typology analysis by the USDA Economic Research Service divides the small family farm category into five groups: Many farmers are upset by their inability to fix the new types of high-tech farm equipment. This

2162-477: Is based on the exporters individual frequency and size. So large-scale companies are more likely to have a lower cost per unit as opposed to small-scale companies. Likewise, high trade frequency companies are able to reduce their overall cost attributed per unit when compared to those of low-trade frequency companies. Economies of scale is related to and can easily be confused with the theoretical economic notion of returns to scale. Where economies of scale refer to

2256-411: Is because labor requirements of automated processes tend to be based on the complexity of the operation rather than production rate, and many manufacturing facilities have nearly the same basic number of processing steps and pieces of equipment, regardless of production capacity. Karl Marx noted that large scale manufacturing allowed economical use of products that would otherwise be waste. Marx cited

2350-547: Is due mostly to companies using intellectual property law to prevent farmers from having the legal right to fix their equipment (or gain access to the information to allow them to do it). This has encouraged groups such as Open Source Ecology and Farm Hack to begin to make open-source agricultural machinery. The debate concerning the role of small farms within the European Union is ongoing. The European Commission states that more than three-quarters of farm holdings in

2444-424: Is expanded, including the aspects concerning the development of knowledge and the organization of transactions, it is possible to conclude that economies of scale do not always lead to monopoly. In fact, the competitive advantages deriving from the development of the firm's capabilities and from the management of transactions with suppliers and customers can counterbalance those provided by the scale, thus counteracting

2538-468: Is lack of detailed, context-specific information on what climate change portends to smallholder farmers in different and widely varying agroecological environments and socio-economic realities, and what management strategies they are employing to deal with these impacts. Especially for smallholders working in commodity crops, climate change introduces an increasing amount of variability to farmer economic viability; for example, coffee production globally

2632-1056: Is often in tension with industrial agriculture , which finds efficiencies by increasing outputs, monoculture , consolidating land under big agricultural operations, and economies of scale . Certain labor-intensive cash crops, such as cocoa production in Ghana or Côte d'Ivoire , rely heavily on smallholders; globally, as of 2008, 90% of cocoa is grown by smallholders. These farmers rely on cocoa for up to 60 to 90 per cent of their income. Similar trends in supply chains exist in other crops like coffee , palm oil , and bananas. In other markets, small scale agriculture can increase food system investment in small holders improving food security. Today, some companies try to include smallholdings into their value chain , providing seed, feed, or fertilizer to improve production. Because smallholding farms frequently require less industrial inputs and can be an important way to improve food security and sustainable food systems in less-developed contexts, addressing

2726-442: Is one where the costs of production fall when the number of firms in the industry drops, but the remaining firms increase their production to match previous levels. Conversely, an industry exhibits an external economy of scale when costs drop due to the introduction of more firms, thus allowing for more efficient use of specialized services and machinery. Economies of scale exist whenever the total cost of producing two quantities of

2820-505: Is possible within a particular country—for example, it would not be efficient for Liechtenstein to have its own carmaker if they only sold to their local market. A lone carmaker may be profitable, but even more so if they exported cars to global markets in addition to selling to the local market. Economies of scale also play a role in a " natural monopoly ". There is a distinction between two types of economies of scale: internal and external. An industry that exhibits an internal economy of scale

2914-608: Is saturating the regional market, thus having to ship products uneconomic distances. Other limits include using energy less efficiently or having a higher defect rate. Large producers are usually efficient at long runs of a product grade (a commodity) and find it costly to switch grades frequently. They will, therefore, avoid specialty grades even though they have higher margins. Often smaller (usually older) manufacturing facilities remain viable by changing from commodity-grade production to specialty products. Economies of scale must be distinguished from economies stemming from an increase in

Mount Mabu - Misplaced Pages Continue

3008-502: Is surrounded by areas devastated by the Mozambican Civil War (1977–1992). Poor road access, and its use as a refuge for local villagers during the war, contributed to its protection. No records of previous expeditions or collecting-trips have been noted. Smallholding A smallholding or smallholder is a small farm operating under a small-scale agriculture model. Definitions vary widely for what constitutes

3102-433: Is that if the capital cost for a given sized piece of equipment is known, changing the size will change the capital cost by the 0.6 power of the capacity ratio (the point six to the power rule ). In estimating capital cost, it typically requires an insignificant amount of labor, and possibly not much more in materials, to install a larger capacity electrical wire or pipe having significantly greater capacity. The cost of

3196-639: Is under increased threat, and smallholders in East Africa, such as in the Ugandan , Tanzanian or Kenyan industries, are rapidly losing both viable coffee land and productivity of plants. In some cases, smallholders are an important source of deforestation . For example, smallholders are an important component of the oil palm industry of Southeast Asia, contributing 40% of the production. Because such farmers are less able to access financing than larger businesses, they are unable to fund methods to increase

3290-659: The Thyolo alethe ( Alethe choloensis ), whose other populations are all threatened by logging and deforestation. Others include Swynnerton's robin ( Swynnertonia swynnertoni ) and the Namuli apalis ( Apalis lynesi ). Several new species have been discovered in the Mount Mabu forest. The high isolation of the area, surrounded by savanna , makes it likely that it is host to many more previously unknown species. Named species so far include: There are likely many more new species in

3384-684: The US Secretary of Agriculture . A 1997 study by the United States Small Farms Commission defined small farms as those with less than $ 250,000 in gross receipts annually on which day-to-day labor and management are provided by the farmer and/or the farm family that owns the production, or owns or leases the productive assets. In 2000, such farms accounted for about 90% of the more than 2.1 million U.S. farms, but only about 40% of U.S. farm production. The concentration of production on fewer and larger operations

3478-415: The short-run average total cost (SRATC) curve down and to the right. Economies of scale is a concept that may explain patterns in international trade or in the number of firms in a given market. The exploitation of economies of scale helps explain why companies grow large in some industries. It is also a justification for free trade policies, since some economies of scale may require a larger market than

3572-417: The "physical" point of view of the returns to scale. Furthermore, supply contracts entail fixed costs which lead to decreasing average costs if the scale of production increases. This is of important utility in the study of corporate finance . Economies of productive capacity balancing derives from the possibility that a larger scale of production involves a more efficient use of the production capacities of

3666-1066: The European Union are less than 10 hectares, with a large number less than five hectares, . However as of 2009 it had not established a formal definition of the term that could be used in its Common Agricultural Policy . The public perception of the possible benefits of small-scale farming has led to requests for further studies from the European Commission . [REDACTED]  This article incorporates public domain material from Jasper Womach. Report for Congress: Agriculture: A Glossary of Terms, Programs, and Laws, 2005 Edition (PDF) . Congressional Research Service . Economies of scale 1800s: Martineau · Tocqueville  ·  Marx ·  Spencer · Le Bon · Ward · Pareto ·  Tönnies · Veblen ·  Simmel · Durkheim ·  Addams ·  Mead · Weber ·  Du Bois ·  Mannheim · Elias In microeconomics , economies of scale are

3760-581: The Mountain that is yet to be explored in association with the growing interest on Mabu. In their cosmology Mount Mabu is a moral subject that needs to be respected. Currently, there are two Mozambican NGOs working with the communities to turn Mount Mabu into a conservation area, namely, Justica Ambiental and RADEZA. These NGOs created associations to protect Mount Mabu in different communities. JA created associations in Nangaze, Nvava, Namadoe and Limbue. RADEZA created committees of natural resources management in

3854-451: The Nvava or the Nangaze community after they died their spirits flew to the mountain. This is the reason why each one of these communities claim legitimate belonging to Mount Mabu. The communities resort to the mountain for protection, animal protein, smallholding , foraging, and traditional ceremonies – mucutu in the present. These activities have generated a wealth of local knowledge about

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3948-511: The advantages of external economies linked to an increase in the production of an entire sector of activity. However, "those economies which are external from the point of view of the individual firm, but internal as regards the industry in its aggregate, constitute precisely the class which is most seldom to be met with." "In any case - Sraffa notes – in so far as external economies of the kind in question exist, they are not linked to be called forth by small increases in production," as required by

4042-569: The assumption of free competition to address the study of firms that have their own particular market. This stimulated a whole series of studies on the cases of imperfect competition in Cambridge. However, in the succeeding years Sraffa followed a different path of research that brought him to write and publish his main work Production of commodities by means of commodities ( Sraffa 1966 ). In this book, Sraffa determines relative prices assuming no changes in output, so that no question arises as to

4136-431: The auction. They found that auction volume did not correlate with competition, nor with the number of bidders, suggesting that auction volume does not promote additional competition. They noted, however, that their data included a wide range of products, and the degree of competition in each market varied significantly, and offer that further research on this issue should be conducted to determine whether these findings remain

4230-431: The average cost for all firms as opposed to internal economies of scale which only allows benefits to the individual firm. Advantages that arise from external economies of scale include; Firms are able to lower their average costs by buying their inputs required for the production process in bulk or from special wholesalers. Firms might be able to lower their average costs by improving their management structure within

4324-434: The base of dynamic economies of scale, associated with the process of growth of the scale dimension and not to the dimension of scale per se. Learning by doing implies improvements in the ability to perform and promotes the introduction of incremental innovations with a progressive lowering of average costs. Learning economies are directly proportional to the cumulative production ( experience curve ). Growth economies emerge if

4418-508: The capitalist system is therefore characterized by two tendencies, connected to economies of scale: towards a growing concentration and towards economic crises due to overproduction. In his 1844 Economic and Philosophic Manuscripts , Karl Marx observes that economies of scale have historically been associated with an increasing concentration of private wealth and have been used to justify such concentration. Marx points out that concentrated private ownership of large-scale economic enterprises

4512-758: The case in the Global North , the reverse happened: they got smaller and more numerous. Several definitions of small farm have been formulated in legislation. In 1977 the US Congress , via the Food and Agriculture Act of 1977 , defined a small farm as one with sales under $ 20,000. At the time these comprised 70% of farms in the US. The Act sponsored additional research on small farming operations by US land grant universities and their extension services and mandated that an annual report on these activities be issued by

4606-452: The chemical industry as an example, which today along with petrochemicals, remains highly dependent on turning various residual reactant streams into salable products. In the pulp and paper industry, it is economical to burn bark and fine wood particles to produce process steam and to recover the spent pulping chemicals for conversion back to a usable form. Large and more productive firms typically generate enough net revenues abroad to cover

4700-425: The conclusion that, whatever firm first gets a good start will obtain a monopoly of the whole business of its trade … ". Marshall believes that there are factors that limit this trend toward monopoly, and in particular: Piero Sraffa observes that Marshall, in order to justify the operation of the law of increasing returns without it coming into conflict with the hypothesis of free competition, tended to highlight

4794-447: The cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time . A decrease in cost per unit of output enables an increase in scale that is, increased production with lowered cost. At the basis of economies of scale, there may be technical, statistical, organizational or related factors to the degree of market control. Economies of scale arise in

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4888-402: The country was self-sufficient in food production in 2002 due to the first Green Revolution started in the latter half of the twentieth century, numerous households lacked resources to purchase food. Holdings less than 2 ha contributed 41% of total food grain production in 1991 compared to 28% in 1971, which means a substantial increase, whereas medium holdings registered a mere 3% increase in

4982-546: The distinctions among farm sizes since the field's inception. Traditional agricultural economic theory considered small farms inefficient, a stance that began to be challenged in the 1950s. An overview of research published by the World Bank in 1998 indicated that the productivity of small farms often exceeded that of larger ones. A croft is a traditional Scottish term for a fenced or enclosed area of land, usually small and arable , and usually, but not always, with

5076-462: The economies of scale due to the increase in size do not depend on indivisibility but exclusively on the three-dimensionality of space. Indeed, indivisibility only entails the existence of economies of scale produced by the balancing of productive capacities, considered above; or of increasing returns in the utilisation of a single plant, due to its more efficient use as the quantity produced increases. However, this latter phenomenon has nothing to do with

5170-434: The economies of scale which, by definition, are linked to the use of a larger plant. At the base of economies of scale there are also returns to scale linked to statistical factors. In fact, the greater of the number of resources involved, the smaller, in proportion, is the quantity of reserves necessary to cope with unforeseen contingencies (for instance, machine spare parts, inventories, circulating capital, etc.). One of

5264-439: The economy. Diversification of crops in smallholder farms is one of the potential strategies in sustaining agricultural productivity, and copping with marketing risks. It is also a transitional step from subsistence to commercial agriculture. Age, education of household head, type of crops, cropping system, amount of credit, and irrigation facilities are some of the factors influencing diversification in smallholder farms. Along

5358-468: The fact that farms with incomes greater than $ 900,000 spend less than 20 percent of their farm-related expenses in the local economy. Small-scale agriculture often sells products directly to consumers. Disintermediation gives the farmer the profit that would otherwise go to the wholesaler, the distributor, and the supermarket. About two-thirds of the revenue is expended on product marketing. If farmers sell their products directly to consumers, they receive

5452-422: The factors underlying the ever-increasing concentration of capital. Marx observes that in the capitalist system the technical conditions of the work process are continuously revolutionized in order to increase the surplus by improving the productive force of work. According to Marx, with the cooperation of many workers brings about an economy in the use of the means of production and an increase in productivity due to

5546-490: The farm contributes to the economic stability of smallholder farming households. These off-farm income-generating activities offer a buffer against agricultural shocks and allow for a diversified livelihood strategy, providing families with increased financial security and access to essential resources. In many developing countries , smallholding is a small plot of land with low rental value, used to grow crops. By some estimates, there are 525 million smallholder farmers in

5640-430: The farming sector was far less in 1990's when compared to previous decades. Kenya's smallholder means someone who owns, possess or produces agricultural products in small-scale . smallholder production accounts for 78 percent of total agricultural production and 70 percent of commercial production. Majority of the smallholder population work in farm sizes averaging 0.47 hectares (1 1 ⁄ 4 acres). This represents

5734-410: The firm increase, the notions of increasing returns to scale and economies of scale can be considered equivalent. However, if input prices vary in relation to their quantities purchased by the company, it is necessary to distinguish between returns to scale and economies of scale. The concept of economies of scale is more general than that of returns to scale since it includes the possibility of changes in

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5828-518: The firm is a perfect competitor in all input markets, and thus the per-unit prices of all its inputs are unaffected by how much of the inputs the firm purchases, then it can be shown that at a particular level of output, the firm has economies of scale if and only if it has increasing returns to scale, has diseconomies of scale if and only if it has decreasing returns to scale, and has neither economies nor diseconomies of scale if it has constant returns to scale. In this case, with perfect competition in

5922-454: The firm is so big in one or more input markets that increasing its purchases of an input drives up the input's per-unit cost, then the firm could have diseconomies of scale in that range of output levels. Conversely, if the firm is able to get bulk discounts of an input, then it could have economies of scale in some range of output levels even if it has decreasing returns in production in that output range. In essence, returns to scale refer to

6016-435: The fixed costs associated with exporting. However, in the event of trade liberalization, resources will have to be reallocated toward the more productive firm, which raises the average productivity within the industry. Firms differ in their labor productivity and the quality of their products, so more efficient firms are more likely to generate more net income abroad and thus become exporters of their goods or services. There

6110-567: The forest, with likely candidates so far including a shrew , a pseudo-scorpion, frogs , snails , bats, catfish, and various insects. In June 2009, the Mozambique government announced that they would establish conservation measures to prevent commercial logging. The Mabu forest is believed to be the largest medium-elevation rainforest in Africa. African forests that are unspoiled by logging and other human activity are rare. The Mount Mabu forest

6204-616: The founder of political economy as an autonomous discipline. John Stuart Mill , in Chapter IX of the First Book of his Principles, referring to the work of Charles Babbage (On the economics of machines and manufactories), widely analyses the relationships between increasing returns and scale of production all inside the production unit. In Das Kapital (1867), Karl Marx , referring to Charles Babbage , extensively analyzed economies of scale and concludes that they are one of

6298-463: The four communities mentioned and six more. RADEZA in association with ITC (Iniciativa de Terras Privadas) persuaded the government to provide community land titles – DUAT. Until, the present there is no formal conservation of Mabu. However, the associations "control" access to the mountain and forest. Among 126 species of birds were identified in the forest; there were seven newly discovered populations of globally threatened species of birds, including

6392-425: The global COVID-19 pandemic , and the attendant disruptions of food systems, their role has become more important. While the historical focus on smallholders has been increasing global food supply under climate change and the role played by smallholder communities, climate adaptation efforts are still hindered by lack of information on how smallholder farmers are experiencing and responding to climate change. There

6486-438: The idea of obtaining larger production returns through the use of division of labor. Diseconomies of scale are the opposite. Economies of scale often have limits, such as passing the optimum design point where costs per additional unit begin to increase. Common limits include exceeding the nearby raw material supply, such as wood in the lumber, pulp and paper industry . A common limit for a low cost per unit weight commodities

6580-479: The increase in the division of labour. Furthermore, the increase in the size of the machinery allows significant savings in construction, installation and operation costs. The tendency to exploit economies of scale entails a continuous increase in the volume of production which, in turn, requires a constant expansion of the size of the market. However, if the market does not expand at the same rate as production increases, overproduction crises can occur. According to Marx

6674-419: The individual phases of the production process. If the inputs are indivisible and complementary, a small scale may be subject to idle times or to the underutilization of the productive capacity of some sub-processes. A higher production scale can make the different production capacities compatible. The reduction in machinery idle times is crucial in the case of a high cost of machinery. A larger scale allows for

6768-424: The marginalist theory of price. Sraffa points out that, in the equilibrium theory of the individual industries, the presence of external economies cannot play an important role because this theory is based on marginal changes in the quantities produced. Sraffa concludes that, if the hypothesis of perfect competition is maintained, economies of scale should be excluded. He then suggests the possibility of abandoning

6862-411: The output market the long-run equilibrium will involve all firms operating at the minimum point of their long-run average cost curves (i.e., at the borderline between economies and diseconomies of scale). If, however, the firm is not a perfect competitor in the input markets, then the above conclusions are modified. For example, if there are increasing returns to scale in some range of output levels, but

6956-475: The output. If a mathematical function is used to represent the production function, and if that production function is homogeneous , returns to scale are represented by the degree of homogeneity of the function. Homogeneous production functions with constant returns to scale are first degree homogeneous, increasing returns to scale are represented by degrees of homogeneity greater than one, and decreasing returns to scale by degrees of homogeneity less than one. If

7050-405: The presence of significant economies of scale. This contradiction, between the empirical evidence and the logical incompatibility between economies of scale and competition, has been called the 'Cournot dilemma'. As Mario Morroni observes, Cournot's dilemma appears to be unsolvable if we only consider the effects of economies of scale on the dimension of scale. If, on the other hand, the analysis

7144-450: The price of inputs when the quantity purchased of inputs varies with changes in the scale of production. The literature assumed that due to the competitive nature of reverse auctions , and in order to compensate for lower prices and lower margins, suppliers seek higher volumes to maintain or increase the total revenue. Buyers, in turn, benefit from the lower transaction costs and economies of scale that result from larger volumes. In part as

7238-569: The production of a given plant. When a plant is used below its optimal production capacity , increases in its degree of utilization bring about decreases in the total average cost of production. Nicholas Georgescu-Roegen (1966) and Nicholas Kaldor (1972) both argue that these economies should not be treated as economies of scale. The simple meaning of economies of scale is doing things more efficiently with increasing size. Common sources of economies of scale are purchasing (bulk buying of materials through long-term contracts), managerial (increasing

7332-516: The productivity and financial sustainability of smallholders is an international development priority and measured by indicator 2.3 of Sustainable Development Goal 2 . Additionally, since agriculture has such large impacts on climate change , Project Drawdown described "Sustainable Intensification for Smallholders" an important method for climate change mitigation . According to conventional theory, economies of scale allow agricultural productivity , in terms of inputs versus outputs, to rise as

7426-419: The productivity of their farms when yields decline, increasing their need to clear more land. Increasing productivity, especially amongst smallholder farms, is an important way to decrease the amount of land needed for farming and slow environmental degradation through processes like deforestation. The definition of a small farm has varied over time and by country. Agricultural economists have analyzed

7520-400: The reasons firms appear is to reduce transaction costs . A larger scale generally determines greater bargaining power over input prices and therefore benefits from pecuniary economies in terms of purchasing raw materials and intermediate goods compared to companies that make orders for smaller amounts. In this case, we speak of pecuniary economies, to highlight the fact that nothing changes from

7614-587: The same period and large holdings registered a decline from 51 to 35%. This signifies the importance of smallholders in the Green Revolution and the attainment of national food security. Smallholder families are becoming more vulnerable and more disadvantaged due to the expansion of international trade liberalisation. The needs and aspirations of small farmers must feature prominently in policies of market reform that seek to improve food and nutritional security. India's total increase rate of productivity across

7708-441: The same when purchasing the same product for both small and high volumes. Keeping competitive factors constant, increasing auction volume may further increase competition. The first systematic analysis of the advantages of the division of labour capable of generating economies of scale, both in a static and dynamic sense, was that contained in the famous First Book of Wealth of Nations (1776) by Adam Smith , generally considered

7802-426: The scale of production. When the size of the company and the division of labour increase, there are a number of advantages due to the possibility of making organizational management more effective and perfecting accounting and control techniques. Furthermore, the procedures and routines that turned out to be the best can be reproduced by managers at different times and places. Learning and growth economies are at

7896-427: The size of the company and the market structure. It is also necessary to take into account the factors linked to the development of capabilities and the management of transaction costs. External economies of scale tend to be more prevalent than internal economies of scale. Through the external economies of scale, the entry of new firms benefits all existing competitors as it creates greater competition and also reduces

7990-409: The size of the farm rises. Specialization has also been a major factor in increasing agricultural productivity, for example as commodity processing began to move off the farm in the 19th century, farmers could spend more effort on primary food production. Although numerous studies show that larger farms are more productive than smaller ones, some writers state that whilst conventional farming creates

8084-446: The specialization of managers), financial (obtaining lower- interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output in media markets ), and technological (taking advantage of returns to scale in the production function). Each of these factors reduces the long run average costs (LRAC) of production by shifting

8178-449: The strength of beams increases with the cube of the thickness. Drag loss of vehicles like aircraft or ships generally increases less than proportional with increasing cargo volume, although the physical details can be quite complicated. Therefore, making them larger usually results in less fuel consumption per ton of cargo at a given speed. Heat loss from industrial processes vary per unit of volume for pipes, tanks and other vessels in

8272-399: The tendency towards a monopoly inherent in economies of scale. In other words, the heterogeneity of the organizational forms and of the size of the companies operating in a sector of activity can be determined by factors regarding the quality of the products, the production flexibility, the contractual methods, the learning opportunities, the heterogeneity of preferences of customers who express

8366-670: The upper and middle reaches of the Nduruma River in the Pangani River Basin, Tanzania, there is not enough water to go around. Smallholder farmers address inequities in land and water distribution by enforcing existing traditional local rules. Whilst larger estate farms may have governmental licences guaranteeing rights to the water, a study found that those large-scale farms which adhere to the traditional water rights structures fare better in terms of social reputation, which better ensures their access to water. Adhering to

8460-417: The variation in the relationship between inputs and output . This relationship is therefore expressed in "physical" terms. But when talking about economies of scale, the relation taken into consideration is that between the average production cost and the dimension of scale. Economies of scale therefore are affected by variations in input prices. If input prices remain the same as their quantities purchased by

8554-556: The variation or constancy of returns. In 1947, DuPont engineer Roger Williams, Jr. (1930-2005) published a rule of thumb that costs of chemical process are roughly proportional to the tonnage in power ~0.6 . In the following decades it became widely adopted other engineering industries and terrestrial mining, sometimes (e. g., in electrical power generation) with modified exponential scaling factors. It has been noted that in many industrial sectors there are numerous companies with different sizes and organizational structures, despite

8648-462: The vast majority of Kenya's rural poor population who depend on agriculture for their livelihood. Adverse risk events during the period 1980–2012 led to production losses in smallholder farms resulting in a drop in agricultural gross domestic product (GDP) of 2 percent or more. Increasing the productivity of smallholder farmers is encouraged due to its potential of improving food availability, increasing rural incomes, lowering poverty rates, and growing

8742-702: The water law in order to enforce their permits is less effective, as regional Tanzanian local governments generally attempt to avoid conflict with their populace. On a larger scale, however, existing traditional rules are ineffective in maintaining cooperation among users along the Nduruma River. In 1975, there were 4.2 million smallholder farming households in Thailand. In 2013, Thailand had 5.9 million smallholder farming households. The average area of these smallholdings had shrunk from 3.7 to 3.2 hectares ( 9 + 1 ⁄ 4 to 8 acres) over that period. Instead of farms getting larger and less numerous, as has been

8836-542: The world. These farms vary in land sizes, production and labor intensities. The distribution of farm sizes depends on a number of agroecological and demographic conditions, as well as on economic and technological factors. Smallholders are critical to local and regional food systems, as well as livelihoods, and especially so during periods of food supply chain disruptions. Smallholders dominate production in certain key sectors such as coffee and cocoa. Various types of agribusinesses enterprises work with smallholding farmers in

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