Research Question: What is the optimal allocation of labor and capital for a Montana farm?
Overview: In this portion of the case study, your objective is to learn about the market with which you're dealing, understand the background of the industry, identify the economic barriers and constraints that firms in this market face, and evaluate various scenarios for overcoming these constraints using theoretical and data-driven insights.
Literature Review
Labor is a critical component in the industry of United States agricultural production. Labor and capital comprise two resources and substitute goods that determine the annual crop yield of modern American farmers and the productivity of farms. Hired farm workers and farm laborers are one of
…show more content…
The technological advances that have had a large impact on the farm industry have been the improved irrigation methods and the use of large tractor equipment. However, the use of the large tractors and improved irrigation systems does increase productivity, but also causes a reduction in employment. In addition to the reduction in employment, it is an expansive purchase of these tractors which cause people that can not offered them to go under or leave the farming industry.The individuals that could afford the equipment expanded the operations. Another effect that has a possibility of affecting the future farming market is the expansion of the service sector. The higher non farm earnings have steered farmers away from …show more content…
Farmers are constantly deciding whether one or the other of an investment will help future profits and help the farm. The substitution of machinery is a common alternative to hopefully be profitable in the long or short run. Some of the reasons farmers come across the substitution of machinery include cost minimization, reliability, pride in ownership, new technology, need for capacity and whatever is going on in the farm machinery market. In addition to the reasons why farmers come across substitution directly relates to some general replacement strategies. Some of those strategies include replacing every year, frequently or keeping the machinery forever (Edwards,