During the past decade, dairy farmers in Minnesota formed a producer's cooperative.

During the past decade, dairy farmers in Minnesota formed a producer's

cooperative. This cooperative's goal is to maximize profits for the milk industry

and allocate profits according to production quotas. Now assume that a conflict

amongst the dairy farmers who are members of the cooperative breaks up the

organization and the market from milk now becomes perfectly competitive. Show

on a diagram what happens to the amount of milk that is provided and the price.

Who benefits from such a change? Who loses? (If possible, use the concept of

consumer and producer surplus to make your argument.) On the basis of this

analysis, would you support using government resources to encourage the

establishment of a new milk cooperative? Why or why not?

Supply In quotaegime Price Price Su pply curve without M00 ———————— quotaP2 ————— Demand 0 Q0 Q1 Quantity Demanded I] Q0 02 Quantity Demanded