Question

The U.S. government decides that the incomes of dairy farmers should be maintained at a level that allows the traditional family dairy farm to survive. It therefore implements a price floor of $1 per pint and also agrees to buy any surplus milk produced at this price. The cost to the government of this policy will be ______ million dollars.

Answer 1

Answer:

$2.8 billion per year

Explanation:

Currently the amount of surplus milk in the US is really high since the demand per capita for milk has decreased by 40% in the last 50 years. Excess milk is turned into cheese since it doesn't last very long, and the current amount of surplus cheese is 1.4 billion pounds.

If yous need on average 4 pints of milk per pound of hard cheese and 2 pints per pound of soft cheese, that means that the total surplus milk production is between 2.8 and 5.6 billion pints.

If the government is going to purchase that excess milk, then it is going to need at least $2.8 billion per year.