Suppose the price of Milk is currently $2/liter. In an attempt to help producers, the

government imposes a price floor (minimum price) of $3/liter.

a) Is this policy efficient?

b) Is this policy guaranteed to increase the income of producers?

c) Suppose instead of a price floor, the government funds a program which lowers the

marginal cost of producing milk. Will such a program increase the income of

producers?