In 1996 dairy farmers, hurt by a decade of low milk prices, began reducing their herds. Subsequently Imora Ayala, a farmer, said he was getting GH¢16 per 100 pounds of milk, rather than GH¢12, which he had gotten earlier. i. Why did the price increase? ii. Dairy cattle are often fed corn. When Ayala got GH¢16 per 100 pounds of milk, he paid GH¢5 a bushel for corn; but when he got GH¢12 per 100 pounds of milk, he paid GH¢2.50 a bushel for corn. Does this mean that Ayala made less money when the price of milk was GH¢16 than when it was GH¢12?

In 1996 dairy farmers, hurt by a decade of low milk prices, began reducing their herds. Subsequently Imora Ayala, a farmer, said he was getting GH¢16 per 100 pounds of milk, rather than GH¢12, which he had gotten earlier. i. Why did the price increase? ii. Dairy cattle are often fed corn. When Ayala got GH¢16 per 100 pounds of milk, he paid GH¢5 a bushel for corn; but when he got GH¢12 per 100 pounds of milk, he paid GH¢2.50 a bushel for corn. Does this mean that Ayala made less money when the price of milk was GH¢16 than when it was GH¢12?

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 2DQ

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