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Economic Research Institute Study paper


Utah State University

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The relative technical allocative, and scale inefficiencies of small, medium, and large-sized dairy farms in Ecuador was investigated. Large farms were found to be the most technically efficient group. However, medium-sized farms were discovered to be the most allocatively efficient group of farms. Capital inputs were found to have the largest output elasticity. Government retail milk pricing ceilings in Ecuador reflect a farm level milk price which is likely above average costs for many producers. However, marginal costs exceed the farm level price indicating that increasing efficiency of the farms would be an essential part of any government designed to increase milk production.