Influence of production change on return to scale

František Střeleček, Radek Zdeněk and Jana Lososová
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František Střeleček: Department Accounting and Finances, Faculty of Economics, University of South Bohemia, České Budějovice, Czech Republic
Radek Zdeněk: Department Accounting and Finances, Faculty of Economics, University of South Bohemia, České Budějovice, Czech Republic
Jana Lososová: Department Accounting and Finances, Faculty of Economics, University of South Bohemia, České Budějovice, Czech Republic

Agricultural Economics, 2011, vol. 57, issue 4, 159-168

Abstract: The paper deals with an assessment of cost efficiency of farms in 2006-2009 based on a sample of farms classified according to the cost/revenue ratio. The analysis of the sample of 101 farms revealed that the return to scale effect is not significant compared to other effects so that the real increase of the production volume may not determine the dynamic of the profit. The massive shift of farms with increasing cost efficiency to the category of the decreased cost efficiency reflects a significant influence of external conditions to the profit/loss of farms. A positive development of prices in 2007 has influenced an increased cost efficiency of the majority of sample farms. In 2008, the increased prices of agricultural inputs intensively influenced the development of the revenue function. The increase of variable costs influenced by increased input prices has wasted reserves resulted from the production use of fixed costs and the return to scale and caused a significant decrease of profit.

Keywords: return to scale; costs; profitability; loss; profit; production (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:57:y:2011:i:4:id:93-2010-agricecon

DOI: 10.17221/93/2010-AGRICECON

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