32 



University of New Hampshire 



[Sta. Bull. 322 



returns Irum the units ul labor and capital at the niarg-in are likely 

 to be rather low. In the winter when very little or no labor can be 

 used to advantage on crops, the operator may well consider using 

 his availal)le labor and equi]inient on woodland management even if 

 the returns for the last units applied are low. 



Thus the farm operator with poor timber resources could get up 

 his own fuel supplies by cutting weed trees. He might well con- 

 tinue using his available time on management and improvement 

 problems even though results were not large. Two farmers with 

 ecj[uivalent available labor in the winter but with widely different 

 timber resources might each use all the available labor on the wood- 

 lands, one employing extensive methods on a good woodlot and 

 ol)taining good returns for labor and the other carrying- out a more 

 intensive management jt)b on the poor tim]:>er resources availa1)le 

 to him. This might result in ([uite different practices on adjoining 

 woodlots and yet each operator would be ct)mbining his available 

 labor and resources to the best advantage. 



Analysis by Budgeting or Substitution 



Of course, the curve as indicated in rigures 17 and 18 cannot be 

 drawn accurately because of insufficient data. But on the other 

 hand, there is enough information to warrant drawing generalized 

 curves. These at least illustrate the situation theoretically and in- 

 dicate one reason why the usual money cost account data cannot be 

 relied upon. Cost account records as usually determined express 

 the average cost per unit. An intelligent decision as to the best 

 combination of enterprises recjuires data concerning the last unit of 

 ir-.i)uts. The decision requires data at the margin (the point where 

 the operator is undecided as to the application of additional expendi- 

 ture of his available resources) ; the usual account records indicate 

 the average cost. Then, too, because of joint costs and joint prod- 

 ucts, supjilementary and complementary situations which exist on 

 these dairy farms, the average cost of any one item such as milk or 

 potatoes cannot be accurately determined. Since neither the mar- 

 ginal cost nor the average cost as usually determined by the cost 



UNITS OF RESOURCES 



FiGUKE 18. Prupurlioiiiiig fuur enterprises 



The curves in figure 18 indicate the net returns from additional applications of 

 resources in four enterprises, dairying, potatoesj replacements and woodland. The 

 best combination of the four enterprises is indicated by the intersections of the 

 horizontal line and the four curves. At these points the net returns for the last 

 unit of resources used ard the same for each enterprise. The sum of the resources 

 used on the four enterprises (.'\U -f- AC -|- AD 4- AE) is approximately equal to 

 the total avail.ible resources (AF). Note that the horizontal line in figure 18 is 

 «i)li'liiK liu'li.r lli.iii i?i tii'iiir 17. 



