This article presents the conceptualization of a farm firm growth model which includes both investment and production decisions. The results obtained in the application of the model to a hypothetical Central Indiana farm under alternative resource availability and optimizing criteria assumptions are reviewed. These applications demonstrate the interaction between investment and production decisions in the growth process and indicate that under realistic conditions optimal firm growth is not scale growth. They also indicate that the growth process and the terminal size are different for different objective functions. Finally, the results illustrate the applicability of such a model for investigating farm firm adjustments in a growth context.
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Boehlje et al. (1969) studied this question.
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