land 



( A cropland) 



( A cows ) 



Each segment of the net income isoquant is a linear approxi- 

 mation of the actual shape of the function. The slope, therefore, is 

 an estimate of the average marginal rate of substitution of cows 

 for cropland over the range of the segment. 



As the ratio of cows to cropland increases, the slope of the net 

 income isoquants decrease. For the isoquants where hay sales were 

 prohibited the slope becomes infinite at the point at which hay would 

 normally be sold. This indicates that additional land would contribute 

 nothing to net income. Beyond the highest analyzed ratios of cows 

 to cropland the isoquants, if drawn, would bend away from the axis — 

 indicating that additional cows would contribute nothing to net in- 

 come. 



The slope of the net income isoquants show that a cow will sub- 

 stitute for many acres at low ratios of cows to cropland. This relation 



600 



400 



300 



LlJ 

 CL 

 O 

 < 



a. 

 o 

 tr 

 o 



200 



100 



o .10 



/ 



.20 



HAY SALES AT / 

 $ 2700 PER TON 



/ / 



/ / 



/ / / 



/ 



$10,000 NET INCOME ISOQUANTS 



FOR THREE MILK RESPONSE 



FUNCTIONS 



MILK PRICE $5 00/CWT 



o 



/ .25 



/ 



/ 



/ 



.30 



/ 



HAY 

 SALES 



RESPONSE 



A HIGH $5 00 

 B MEDIUM $5 00 

 C LOW $5 00 



40 



80 



COWS 



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

 quality cows, one price for milk, various ratios of cows to cropland and with 

 and without hay sales. 



29 



