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