Opportunity costs and economic income on farms

Krasimira Kaneva

Abstract: A methodical approach is adapted for assessing of opportunity costs and of farms’ economic income, according their specialization and economic size. The necessity of opportunity costs calculation is to account for and deduct from the net income the appropriate remuneration for unpaid family labour and for their land and capital return, invested in the production. The real economic farms profitability has been defined on the basis of obtained as a residual value economic income and comparative analysis has been made with indicators before the deduction of opportunity costs. As a result of the implemented approach it is noted that in the farms with vegetable and perennial crops the opportunity costs exceed the net income, so there is a lack of realized economic income and the functioning of these farms is endangered. For this farms category it would be economically more profitable to invest their resources in alternative business. The small farms of Natural persons and Sole proprietors with economic size under 25 000 euro standard production are mostly negatively affected, as the share of own production factors is the highest.

Keywords: economic income; net income; opportunity costs; profitability rate

Date published: 2017-10-09