PS6_ProblemSet

PS6_ProblemSet - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

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AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #6 This assignment is due at the beginning of class on Tuesday October 28, 2008. 1. Dairy farmer John sells fluid milk to Dean Foods, a large milk processor, for \$1 a gallon. Dean foods sells processed milk to Wegmans, a food retailer, for \$1.45 a gallon. Wegmans sells milk to consumers for \$3.20 a gallons. It costs \$.6 (labeling, storage, etc) for Wegmans to sell a gallon of milk. Assume there is no loss of milk from farmer John to Wegmans, i.e., k = 1. (a) Calculate the farm-processor marketing margin, the processor-retail marketing margin, and the farm-retail marketing margin, respectively. (b) Calculate Wegmans profit for selling a gallon of milk. Is this profit a component of the farm-retail marketing margin? Explain why. (c) Suppose now we were told that due to processing technology constraint, 1 pound of farm milk only produces 0.8 pounds of milk at the retail level. Recalculate the farm- retail marketing margin. 2.

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PS6_ProblemSet - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

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