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1. You are examining a two-product utility maximization problem for an average Wisconsin dairy farm, where the two products are hay and feed corn purchased

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1. You are examining a two-product utility maximization problem for an average Wisconsin dairy farm, where the two products are hay and feed corn purchased to feed the cows [assume that utility is associated with prot, which increases with more cows). 3.. b. The monthly budget of the average farm is $3000, hay costs $150/ton, and feed corn costs $200fton. Draw the budget constraint [1301] for this average dairy farm. Would the level of utility associated with an indifference curve containing the bundle {18 tons of hay, 8 tons of feed corn) be attainable for the average farm? Why or why not? Draw an indifference curve (101) for this average farm that would maximise utility given the budget constraint. Label the utility maximizing bundle of goods point \"A\". . Now imagine that the environmental division of your agency publishes a study stating that growing hay is beneficial for reducing precipitation runoff, thus improving water quality. As a result, you decide as an agency to intervene in the market for hay. Why would you do this and what course of action might you recommend? After your intervention from part d., the price of hay for dairy farmers is now essentially $100fton. Draw the new budget constraint for the average farm [30;]. Draw a new indifference curve (102) for this farm that would maximize utility given B02. Label the utility maximizing bundle of goods point \"B\". Is the average farm better or worse off in this scenario than they were in part c.? Why? . The governor is concerned that your policy recommendation from d. will lead to a large budget deficit for the state. Model the scenario that occurs in the market for capitalfinvestmmt because of budget decits/debts and describe what happens as a result. (Hint: think long-term effects.) What is the term used to represent what happens in this market

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