Break-even price differentials: 

 For high milk response cows 



.36 



V = 



.15 l^ (1+.15)V 



V = 240 (0.4283) 

 V=$103 



For low response cows 



V = ^ (l ^- 



15 \ (1 + .15)' 



V = -460 (0.4283) 



V = -$197 



The results of these computations can be interpreted as fol- 

 lows: it pays to buy a cow of the high milk response only if its price 

 is less than $103 more than a cow of medium response. Similarly, it 

 pays to buy a cow of medium milk response only if its price is less 

 than $197 higher than a cow of low milk response. 



Summary of Resource Valuation 



The ratio of cows to cropland strongly influences the value of 

 added units of all resources and intermediate products. This influence 

 is increased by the absence of the alternative to sell hay. The ratio of 

 cows to cropland has a similar influence on the marginal rate of 

 substitution of cropland for cows. 



The price of milk has been shown to exert a considerable in- 

 fluence on the marginal return of cows and the marginal return over 

 feed costs. However, it has an almost negligible effect on the marginal 

 return of cropland, forage, and replacements in this model. 



The amount of cropland per cow has little effect on the differ- 

 ences in net income due to changes in quality of cows or grain feeding 

 levels. The price of milk has a somewhat greater effect on the differ- 

 ences in net income due to changing quality of cows than to changing 

 grain feeding levels. 



40 



