THE SIZE OF FARMS 



161 



but it is worth while to discuss the principles underlying this 

 problem. In applying a given amount of managerial activity 

 to land, equipment, and laborers the law of increasing and 

 diminishing returns must be considered. If the managerial 

 activity is expended upon too small a farm, the profits will fail 

 to rise to the maximum through lack of business, and if the 

 farm is too large, the expenses will absorb too large a pro- 

 portion of the income, and the profits will not be at the maxi- 

 mum. 



This point may be illustrated by means of the following table, 

 in which the number of composite units (a unit may be thought 

 of in this illustration as one laborer and the amount of capital- 

 goods and land which should be associated with him) to be 

 associated with one unit of managerial activity (which may be 

 thought of as the amount of such activity which one farmer 

 wishes to devote to production) is increased seriatim from 

 one to eight, and as a result of the increase in the number of 

 the composite units brought under the one management, the 

 net profit per composite unit is represented as gradually falling 

 from $260 to $80, while the resulting net profit per unit of 

 managerial activity is represented as increasing until after the 

 fifth composite unit is added, after which it is represented as 

 falling. 



TABLE X 



The figures here used are selected more or less arbitrarily 

 to illustrate the general truth that, as the number of the com- 



