The accompanying table shows hypercritical demand and supply schedules for milk barrier. The US government decides that the income of daily farmers should be maintained at a level that allows the traditional family dairy farm to survive. So it implements a price floor of $1 part pint by buying surplus milk until the market price is $1 per pint.

Price of milk are pink

quantity demanded

quantity supplied

$1.20

550

850

1.10

600

800

1.00

650

750

0.90

700

700

0.80

750

650

A.In a diagram, show the deadweight loss from the inefficiently low quantity bought and sold.

B.How much Surplus milk will be produced as a result of this policy?

C.What will be the cost to the government of this policy?

D.Since milk is an important source of protein and calcium, the government decides to provide the surplus milk it purchases to elementary schools at a price of only $0.60 per pint. Assume that schools will buy any amount of milk available at this low price. But parents now reduce their purchase of milk at any price by 50 million pints per year because they know their children are getting milk at school. How much will the dairy program now cost the government?

E.Explain how inefficiencies in the form of inefficient allocation to sellers and wasted resources arise from this policy.