The Middle Sized Farming Operation: A Goods-and-Services Firm?

J. A. Ginzel, E. W. Kehrberg and G. D. Irwin

Journal of Agricultural and Applied Economics, 1971, vol. 3, issue 1, 123-128

Abstract: Traditionally, the economics of farm number adjustments have been inferred from the relative positions of firms on a longrun average cost curve. The steep slope of the left portion of the commonly drawn curve suggests demise of the smaller units as fast as off-farm and inter-farm markets can absorb their labor and land resources. On the less steeply declining middle portion of the curve, insufficient volume of output (income) is suggested as a cause of firms quitting. The argument is supported by the fact that most empirical estimates do not show the long-run cost curve rising at large outputs. This places downward pressure on product prices, reducing per unit margins, and creating income problems for the middle group of firms. Adjustments in the farming sector are then viewed as constrained by the limitations of factor and product markets, as well as by values and traditions of farm people.

Date: 1971
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