is greatly accentuated in the situations where hay sales are not al- 

 lowed. As higher cow cropland ratios are obtained a cow will sub- 

 stitute for fewer and fewer acres of cropland. 



Profitable adjustments in numbers of cows and acres of cropland 

 can be found by the following procedure: 



(1) Multiply the acres for which a cow will substitute, i.e., the 

 slope of the isoquant by the price of land. 



(2) Subtract the price of the cow from the above. 



(3) The result will be the net gain for making the substitution. 

 A positive net gain indicates it will pay to substitute cows for 

 cropland. A negative figure indicates it will pay to make an 

 opposite substitution — i.e., substitute cropland for cows. 



The milk price and the milk response function exert little in- 

 fluence on the shape of the net income isoquants. The substitutability 

 of cows for cropland — i.e., the slope of the net income isoquants — 

 depends mostly on the ratio of these resources. 



Two conclusions result from the comparison of net income iso- 

 quants for milk responses for different quality cows and milk prices. 

 First, they support the same conclusions as the net income functions. 

 Namely, that it takes a great increase in quality of cow to offset the 

 effects of an unfavorable milk price. Second, the quantities of re- 

 sources required to produce a $10,000 net income increase rapidly 

 with less favorable prices and lower quality cows. 



Both the net income functions and the net income isoquants 

 show that considerably greater incomes may be obtained by intensive 

 farms than by extensive farms. The addition of a few cows will greatly 

 increase the net income of extensive farms. Similarly, the net income 

 isoquants show that a single cow will substitute for several acres of 

 cropland at low ratios of cows to cropland and leave income un- 

 changed. 



The milk response of different quaUty cows exerts a considerable 

 influence on both the net income potential and on the resource re- 

 quirements to obtain a specified net income. It is shown by the net 

 income functions that net incomes may be up to twice as great with 

 high quality cows than with low quahty cows. The greater differences 

 occur on intensive farms with high milk prices. From the net income 

 isoquants it can be seen that to produce a $10,000 net income, the 

 cropland and cows required are one and one-half to two times as 

 great with the low quality cows than with the high quality cows. The 

 greater resource requirements occur with low milk prices. 



Viewed a third way, the anaylsis shows that the income potential 

 of identical resource packages are up to four times as great with the 

 $6.00 milk price than with the $4.00 milk price. The greater differ- 

 ences occur at high ratios of cows to cropland at the higher milk 

 response function. Similarly, the resource requirements to produce a 

 $10,000 net income are up to four times as great with the $4.00 

 milk price than with the $6.00 milk price. 



30 



