Health Policy

An Introduction to Farm Organisation & Management by M. Buckett (Auth.)

By M. Buckett (Auth.)

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1. 1. 2. 3. 2. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Loss Minimisation 32 32 33 33 33 33 34 35 36 38 40 41 42 43 45 45 47 48 48 3 . 1 . 1. Introduction S o m e people are initially confused by e c o n o m i c principles a n d therefore h a v e little t i m e for t h e m . H o w e v e r , if carefully i n t e r p r e t e d in relation to a given farm situation they c a n p r o v i d e guidelines t o h e l p t h e f a r m e r t a k e decisions necessary for successful, e c o n o m i c p r o d u c t i o n .

H o w e v e r , if each of his scores progressively decline, his overall average falls. M e a n w h i l e his total score for a lifetime keeps o n rising. F r o m Fig. 9 it c a n b e seen t h a t t h e highest total p r o d u c t is at t h e p o i n t w h e r e m a r g i n a l p r o d u c t is zero a n d cuts t h e axis. I Stage I , Stage 2 . Stage 3 Total product Marginal product FIG. 9. Total product, average product, and marginal product. T h e t h r e e stages of p r o d u c t i o n are also s h o w n in Fig.

W h e r e m a r g i n a l cost equals m a r g i n a l r e v e n u e . T h u s t h e average r e v e n u e is greatest at p o i n t 38 An Introduction 60 55 50 to Farm Organisation - and Management y Average B 45 revenue 40 35 30 25 - I \ / 20 Average \. 15 and marginal cost 10 r i i i i 4 I 5 1 6 U n i t s of I 7 I l 1 \ 1 12 input FIG. 11. Profit at point of maximum average return A and profit at point of maximum total profit B. —Assumes that each extra unit of input costs the same as the previous unit.

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