COSTS OF PRODUCTION OF COCOA IN COMALCALCO, TABASCO

Abstract

The objective of this study was to determine the amount of output of cocoa (Theobroma cacao L.) that maximizes short-run profits or minimizes short-run losses. The analysis was based on costs functions estimated from cross-section data that were obtained from a survey conducted among farmers in the municipality of Comalcalco, Tabasco, México, in June and July of 1990. The cross-section data were used to estimate the total variable cost function by the least squares method. The total cost function was then obtained by adding the estimated total fixed costs and the total variable cost function. The average total cost, the average fixed cost, the average variable cost and the marginal cost functions were derived from the total cost function. The study is completed with the analysis of the estructure of costs of production. Results indicated that farmers who operate at average level of output are lossing. Total revenue is less than total cost at this level of output; nevertheless, it pays total variable cost and a part of fixed costs. The average level of output of cocoa in the study period is lower than those that correspond to the minimum of the average variable cost, the minimum of the average total cost and the optimum amount of output. It occurs where the marginal cost and the average variable cost are decreasing. Therefore, to diminish losses in the short run the level of output must be increased above the average, if the input-output price relationship stays unchanged.