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<br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />n/'1"~"3 <br />U~';LU~' <br /> <br />E. AGGREGATE FARM OUTPUT <br /> <br />This component model s the entire U.S. agricultural sector. It deter- <br />mines equil ibrium aggregate farm output and prices received by farmers. <br />These indicators are not commodity specific quantities and prices but are <br />in the form of indices or gross total s. Here the quantity suppl ied by <br />farmers for production items, the quantity supplied in the previous year, <br />and the aggregate farm output supply shift. The scenario-detennined <br />inflation rate is the major determinant of prices paid by farmers. <br /> <br />In microeconomic theory, the supply of any produced item is a result <br /> <br /> <br />of the marginal cost of the production of that item. In the U.S. agricul- <br /> <br /> <br />tural sector, the aggregate supply of commodities is increased either by <br /> <br /> <br />using the existing resources in the agricultural sector more intensively or <br /> <br /> <br />by acquiring additional resources. <br /> <br />Wi thi n a particul ar year the resources in the agric ul tural sector can <br />be divided into two classes: those resources which are readily available <br />and can be purchased quite readily from suppliers; these include labor, <br />fertilizer, energy such as fuel, and chemicals. The second category are <br />those resources which are fairly specific to the agricultural sector and <br />are difficult to acquire within a particular year; these include cropland, <br />machinery, service buildings, and livestock breeding herds. A fixed quan- <br /> <br />11-35 <br />