ABSTRACT
In a report that is one of the classics of the profession, J. Patrick Madden anticipates most of the issues confronting those making cost of production estimates. Madden points out several problems associated with attempts to apply Econ 1 principles in agriculture. Madden points out that many farms are "goods-and-service" firms producing not only farm commodities, but also various services such as custom work and off-farm jobs, and have the possibility of owning and operating durable resources which provide them with surplus capacity. He notes that there is great variability in the supervisory and coordination functions required on different types and sizes of farms, and that these functions are easily underestimated. Most studies suggest that as farm size increases, average costs decrease at least over a considerable range. A farm viewed as a "goods-and-service" firm may have a lower average total cost than would the same farm viewed as a firm producing only farm commodities.
