income potential of farms with low quality cows and a $5.00 or $6.00 

 milk price. Hence, it takes a great increase in quality of cow to offset 

 an unfavorable milk price. Since an individual farmer can't control 

 the milk price, improving the quality of his cows is his best alter- 

 native at low milk prices. At higher milk prices adding more cows 

 becomes more favorable. 



Net Income Isoquants 



The income surfaces developed in this study are shown in 

 Figures 9 and 10. The milk response functions for three qualities of 

 cows are compared in each figure. Figure 9 compares the $6.00 and 

 $4.00 milk prices and figure 10 illustrates the three responses at the 

 $5.00 milk price. Each net income isoquant describes combinations 

 of cropland and cows that yield the specified income level. They 

 also indicate the effects of substituting cows for cropland. 



In each figure the slope of the isoquant represents an arc 

 estimate of the marginal rate of substitution of cows for crop- 



500 



400 



300 



a. 

 o 



< 



Q_ 



o 



O 200 



100 



$10,000 NET INCOME ISOOUANTS 



FOR THREE MILK RESPONSE 



FUNCTIONS 



MILK PRICES $600 a $400/CWT 



NO HAY 

 SALES 





HAY SALES AT 

 $2700 PER TON 



RESPONSE 



A HIGH $6 00 



B MEDIUM $6 00 



C LOW $6 00 



D HIGH $4 00 



E MEDIUM $4 00 



F LOW $ 4 00 



40 



COWS 



80 



120 



Figure 9. Isoquants for a $10,000 net income with low, medium and high 

 quality cows, two prices for milk, various ratios of cows to cropland and with 

 and without hay sales. 



28 



