THE PROPORTIONS OF THE FACTORS OF PRODUCTION 143 



units the average net return per unit will be represented by 

 one-fifth of the area RR' H' H ; for the total return minus the 

 rent is represented by the area RR' H' H, and since five units 

 have been applied this net return must be divided by five 

 to find the average. Likewise after the application of the sixth 

 unit, it will be one-sixth of the area RR'I'I. After the ap- 

 plication of the seventh unit, the average will be one-seventh 

 of the area RR' K' K. Thus the line of average net returns 

 (line RY'P' in Fig. 7) rises rapidly until the line II' is crossed, 

 after which it rises less rapidly until it crosses the line I'B, after 

 which it falls. When a fixed rent is paid, the line of average 

 net returns can never rise so high as the line of average gross 

 returns, and the point Y', where the line of average net returns 

 reaches its maximum distance from the base line AB, will 

 always be farther to the right than point X' ; and hence the 

 highest average net return per composite unit of labor and 

 capital-goods employed on land for which a fixed rent must 

 be paid will be gained by a more intensive culture than when the 

 same land could be had rent free. 



When the farmer follows the rule of seeking the largest net 

 profit for his exertion, the degree of intensity of culture on a 

 given piece of land and in the production of a given crop will 

 vary with the amount of the fixed rent which is paid for its 

 use, — the greater the amount of rent, the higher the degree 

 of intensity, for when a higher rent must be paid for the use 

 of the land a more intensive culture is necessary if the highest 

 average net return is to be secured. 



If the proposition is reversed and we think of successive 

 increments of land being brought under a given number of 

 composite units of the other factors, the simple statement will 

 suffice that the amount of land should be increased until the 

 final increment of land adds just enough to the total product 

 to pay the cost of securing the use of the land. 1 It will readily 

 be seen that this would result in the degree of intensity of cul- 

 ture which will yield the largest net return per composite unit 

 of the other factors. On the assumption, therefore, that one 

 1 See "The Distribution of Wealth," by T. N. Carver, pp. 80-83. 



