The accompanying table shows hypothetical demand and supply schedules for milk per year. The U.S. government decides that the incomes of dairy farmers should be maintained at a level that allows the traditional family dairy farm to survive. So it implements a price floor of $1$ per pint by buying surplus milk until the market price is \ 1$perpint.a.Inadiagram,showthedeadweightlossfromtheinefficientlylowquantityboughtandsold.b.Howmuchsurplusmilkwillbeproducedasaresultofthispolicy?c.Whatwillbethecosttothegovernmentofthispolicy?d.Sincemilkisanimportantsourceofproteinandcalcium,thegovernmentdecidestoprovidethesurplusmilkitpurchasestoelementaryschoolsatapriceofonly$ 0.60$ per pint. Assume that schools will buy any amount of milk available at this low price. But parents now reduce their purchases 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.

Key Concepts: Demand And Supply Schedules, Price Floor, Deadweight Loss, Surplus Production, Government Cost, Inefficiency Explanation: The given question is about understanding and analyzing the outcome of a price floor implemented by the U.S. government on milk. It includes the identification of deadweight loss, surplus production and cost to the government along with an explanation of inefficiencies in the form of inefficient allocation to sellers and wasted resources arising from this policy. Step by Step Solution: Step 1. Draw a demand and supply diagram to show the effects of the implementation of a price floor on the market for milk. Label the axis with the quantities and prices. Step 2. Identify and shade a triangle representing deadweight loss caused by the inefficiently low quantity bought and sold due to the price floor. The triangle should lie between the demand and supply curves and above the equilibrium quantity. Step 3. Calculate the surplus milk that will be produced as a result of this policy by finding the difference between the quantity supplied and the quantity demanded at the price floor of $1perpint.Roundtheanswertothenearestmillionpints.Step4.Calculatethecosttothegovernmentofthispolicybymultiplyingthesurplusmilkgeneratedbythedifferencebetweenthemarketprice($ 1$perpint)andthepriceatwhichthegovernmentpurchasesit(1$ per pint). Round the answer to the nearest million dollars. Step 5. Calculate the new cost to the government after schools purchase the surplus milk at a price of 0.60 per pint and parents reduce their purchases of milk by 50 million pints per year. Round the answer to the nearest million dollars. Step 6. Explain how inefficiencies arise from this policy. Inefficient allocation to sellers occurs because some producers who are willing and able to sell milk at the market price may not be able to do so due to the price floor. Wasted resources occur due to the surplus of milk that is produced and ultimately purchased by the government.