ORGANIZATION OF THE FARM 



the third are indispensable ; and, in case a farmer 

 can manage a fixed number of these composite 

 units, made up of capital-goods and laborers, 

 when employed in the production of a given crop 

 without reference to the area on which they are 

 employed, the highest average return per unit is 

 the thing which he should seek, for with a fixed 

 cost per composite unit this will enable him to 

 secure the largest net profit per composite unit, 

 consistent with the proper intensity of manage- 

 ment, and hence will enable him to secure the 

 maximum total net profit for his exertion. 



In the illustration (Fig. i) the average product 

 per unit is represented as increasing rapidly until 

 the sixth unit has been applied and then less rap- 

 idly until a point is reached where the return per 

 increment is just equal to the average. At this 

 point the average return per unit reaches the 

 maximum, and the application of another incre- 

 ment would reduce the average product per unit 

 employed. The thousand composite units are 

 used in the most economical manner when the 

 acreage is so limited that the number of units ap- 

 plied to each acre is just sufficient to yield the 

 maximum average return per unit. For exam- 

 ple, the highest average return would be gained 

 by the application of X units in the case before 

 us in Fig. i, where the location of X is deter- 

 mined by the fact that the rectangle A V X' X is 

 drawn in such a manner that its area equals the 



TOT 



