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Establishment of a new milk cooperative

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Reference no: EM132066220

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?

Reference no: EM132066220

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