Abstract: “Input-output” research of farming systems can assist the development of appropriate agricultural structures in China. Such analysis can assist grassland systems to optimize farmland resources and to make better use of the multiple cropping index. In this paper, we use economic theory’s short-term production model, focusing on the marginal product and the law of diminishing marginal returns, to systematically compare traditional grain crops monoculture with grassland farming systems. Our analysis concludes that the grassland system has clear advantages. It can readily adjust variable factors, offsetting a single variable input in order to reduce the adverse effects of negative marginal outputs and production. Grassland systems also have substantial effects on the recovery of soil fertility and increased crop output, thereby increasing actual economic benefits for farmers. They play a significant role in the optimal use of land resources, agricultural water and soil conservation and also the development of animal husbandry. In conclusion, grassland farming systems help to increase both farmer incomes and the ecological protection of agricultural environments.