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Supply Management Questions #4, 85, 86 and #7 are related to supply management in dairy. Developed countries such as Canada, the U.S., Japan, Korea and

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Supply Management Questions #4, 85, 86 and #7 are related to supply management in dairy. Developed countries such as Canada, the U.S., Japan, Korea and those in the E.U. Intervene in their agricultural industries. The tools of intervention often involve guaranteeing a price floor (price support) or imposing supply management (quota) on agricultural production. Your next task at Aeon Insights is to evaluate Canada's intervention in our dairy industry. Quantities of milk are in gallons. You have been asked by the Department of Agriculture to evaluate four policy choices. From published studies, you know that Demand: P = 12 -0.00050 Supply: P = 2 + 0.00050 Policy #1: The benchmark case is when there is no government intervention, so simply demand = supply. Policy #2: Price support = $10 and the dairy farmers sell to consumers at this price. To ensure that the dairy farmers benefit from this policy, the government buys and stores any excess supply at this price The social surplus (SS) under Policy #1 is equal to and the SS under Policy #2 is equal to a. $50.000; - $52.000 b. $50,000; $68,000 C. $25,000: $11,250 d. $25,000; - $64.000 Policy #3: Price support = $10, the government buys all as but rather than store any excess supply, it sells all Qs to Canadians. The SS under Policy #3 is equal to a. $32,000 b. - $32,000 c. $128.000 d. - $128.000 Policy #4: Quota = the Qd when P = $10 and this policy does not require the government to purchase or sell any milk. The SS under Policy #4 is equal to a. $32,000 b. $28,000 c. $18,000 d. $8,000 If the goal of this government intervention is to maximize Cs, it should adopt If the government's main goal is to maximize PS, it should adopt If its goal is to maximize SS for the economy, it should adopt a. Policy #3; Policy #2: Policy #1 b. Policy #2: Policy #4: Policy #1 C. Policy #4; Policy #1: Policy #2 d. Policy #3; Policy #2: Policy #4

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