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