Marginal Cost of Production and Influence on Profit
How much is that last cow contributing to farm profit?
An analysis of the average Waikato Dairy Farm profit relative to hers size demonstrating the flat Farm Operating Surplus Curve when assessed against herd size. Source data from Dairy Industry survey.
Note the rapid decline (negative) in the marginal contribution per cow as herd number increases due primarily to the introduction of purchased in feeds. Also note how little influence there is on total profit from a 10 percent reduction in the herd numbers.