## Case of the Day: Dairy Farming from the Input Side

*This case builds on the earlier Dairy Farms case. Refer to that case or the Excel link below for the numbers.*

Download Excel version of tables

We now consider the profit-maximizing choice of the variable input (purchased feed) for the dairy farm in the earlier example. Recall that we derived the marginal product of feed in the earlier case.

- Suppose that the price of milk is $0.30 per pound. Calculate the marginal revenue product of feed for each level of feed input given in Table 1 and show the MRP curve.
- What would be the profit-maximizing level of feed input at an input price of $0.24 per pound? Using the previous case, what would be the output of milk at that level of input? How does this result compare with the profit-maximizating output calculated using the marginal cost curve in the earlier case study?
- Now re-do the above two problems assuming that the output (milk) price falls to $0.24 per pound.