PRICE-FIXING AND THE COST OF FARM PRODUCTS 371 



of city milk we approach more nearly to a specific cost of a spe- 

 cific product as far as the live stock industry is concerned, with 

 only a small by-product in the form of a veal calf. And yet 

 this type of dairying has its costs intermixed with the system 

 of cropping, notably in the use of labor, the use of crops, and 

 the provision of fertilizer. Hence, in mixed farming, joint costs 

 are present to block the effort to arrive at the cost of producing 

 any specific farm product. 



Where two articles are produced as a result of the same work, 

 the combined prices of the two tend to equal the greatest neces- 

 sary cost of producing them, but the price of each article is 

 determined separately on the basis of supply and demand. 



Consumers want a variety of things produced by the farmer. 

 How much a consumer will pay for a given article depends upon 

 the intensity of his desire for it. The intensity of this desire 

 depends upon how abundantly he has been supplied. The more 

 he takes the less he will pay for any given unit of the goods. 

 Unfortunately, under conditions of joint costs there are certain 

 physical facts which determine the ratios in which goods are pro- 

 duced, without much regard to the ratios of the intensity of the 

 desire for them. As a result the supply-demand price of one 

 product may be higher and that of another lower than the cost, 

 but the combination of crops may prove profitable. The case 

 is similar to the situation in the oil business. Gasoline and kero- 

 sene have a joint cost ; and it is the condition of the market and 

 the relative proportion in which they are obtainable at a common 

 cost which makes the price of gasoline nearly twice as high as 

 that of kerosene at the present time. 



Total farm profits and price regulation. When the point of 

 view of total farm profits is accepted the problem becomes that 

 of so regulating prices that the farmer in one line of produc- 

 tion may reap as large a reward as he could earn producing 

 some other product, or else of helping him in getting into some 

 other line of production. By looking to total farm profits we 

 avoid many of the difficulties arising out of differences in the 

 costs of producing a given article by different men. Even if it 

 costs one man 2 cents a quart to produce milk, another 3 cents, 



