some hay, and the sale of some replacement stock. At milk prices be- 

 tween $3.40 and $4.40, the solutions indicate 58 cows (the representa- 

 tive farm's 1960 number of cows on hand), the second lowest grain 

 feeding rate and the raising of replacements. If milk price ranges be- 

 tween $4.40 and $5.00 per hundredweight, the farm should operate at 

 full barn capacity (63 cows). As the price gets higher, the optimized 

 solutions call for significant adjustments in the farm's operations. Ex- 

 pansion of barn facilities to permit up to 94 cows, increase in feeding 

 rates to the highest levels, and a change to a "purchase replacements" 

 program are indicated. The nature of the step supply function suggests 

 that this farm should be relatively sensitive to price changes under 

 intermediate run conditions (Figure 3) . The implication of the function 

 is that the potential milk supply forthcoming from the representative 

 farm of Area 3 at a price, say $5.20, should be about 44,000 pounds 

 greater than if the price were $1.00 less and the price of milk and 

 prices of other factors were expected to hold long enough for the inter- 

 mediate run conditions to prevail. 



Price per cwt. 

 $7.00 — 



eoc 



5.00 



4.00 



3.00 



2.00 



^^3,000 4p00 5^000 6]^0 ^000 8,000 9,000 10,000 



Optimum Milk Output in Cwt. 



J 



Figure 3. Milk Supply Function, Area 3 Farm, Croup 5 Category 



25 



