For the organization of the farm industry to be efficient in terms of income maximization would require that farm output be produced at minimum factor cost, that aggregate farm output clear the market at prices covering the factor opportunity costs and that the product mix be geared to the consumers’ wants. Meeting these requirements would mean that the income of individual farm operators would be maximized and that the farm industry would make its maximum contribution to national income.

Implicit in conducting the research reported here was the hypothesis that existing resource and production characteristics of the farm industry were not approximations to the economic efficiency conditions. Specifically, we hypothesized that the farming industry contained two major types of resource imbalances.