Milk Producer Files for Bankruptcy

January 7, 2020

One of America’s oldest and largest milk producers files for bankruptcy.

Questions

1. What role did the Borden Dairy Co. fill during the U.S. Civil War?
2. What is the effect on the supply of milk and the demand for milk of dairy farms going out of business?
3. Given your answer to #2, everything else remaining the same, what happens to the equilibrium price and the equilibrium quantity of milk?
4. The news article tells us that the price of milk is falling and the quantity of milk sold is decreasing. We know that dairy farms are going out of business. What else is happening? How do we know?
5. Draw a diagram to illustrate your answer to #4.