Another useful, well-writtten statement of this argument is in Brian Tomasik's "Does Vegetarianism Make a Difference?":

Suppose that a supermarket currently purchases three big cases per week of factory-farmed chickens, with each case containing 25 birds. The store does not purchase fractions of cases, so even if several surplus chickens remain each week, the supermarket will continue to buy three cases. This is what the anti-vegetarian means by "subsisting off of surplus animal products that would otherwise go to waste": the three cases are purchased anyway, so consuming one or two more chickens simply attenuates the surplus.

What would happen, though, if 25 customers decided to buy tempeh or beans instead of chickens? The purchasing agent who orders weekly cases of chickens would probably buy two cases instead of three. But any given consumer can't tell how far the store is from that cutoff point between three vs. two cases. The probability that any given chicken is the chicken that causes two cases instead of three to be purchased is 1/25. If you do avoid the chicken at the cutoff point, you prevent a whole case -- 25 chickens -- from being ordered next week. Thus, the expected value of any given chicken is (1/25) * 25 = 1 chicken, just like common sense would suggest.

*2 points [-]