Cost economies and resource requirements associated with size and expansion of farms - Blackland area of Texas

Abstract

This study was designed to examine the relationship associated with average per unit production costs and utilization of plant size, and to determine the relationship between plant sizes and average per unit production costs on crop-livestock farms in the Blackland area of Texas. Short-run total cost curves were developed for five "fixed" plant sizes and from these curves a long-run or planning curve was approximated. Cost economies and resource requirements associated with the different plant sizes and varying levels of acreages were determined from the data generated. "Fixed" plant size was defined by the number of regular workers in the labor force, size of field equipment and capacity of power machinery. The synthetic-firm approach was used to construct enterprise budgets for the hypothetical firms analyzed. A basic cost-minimization linear programming model was employed to estimate short-run average total cost curves and least-cost farm plans. Various degrees of plant utilization were represented by different levels of gross income. Plant size and level of gross income were specified in the model so that the least-cost combination of products and variable resources for a given plant and level of gross income were computed. A cost-income ratio was calculated from each programming solution by dividing total costs by gross income. Thus one point on the short-run cost curve for a specified plant size was obtained.