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The following appeared in a letter to the editor of a Batavia newspaper.
"The department of agriculture in Batavia reports that the number of dairyfarms throughout the country is now 25 percent greater than it was 10 yearsago. During this same time period, however, the price of milk at the localExcello Food Market has increased from $1.50 to over $3.00 per gallon. Toprevent farmers from continuing to receive excessive profits on an apparentlyincreased supply of milk, the Bataviagovernment should begin to regulate retail milk prices. Such regulation isnecessary to ensure fair prices for consumers."
Write a response in which you discuss whatquestions would need to be answered in order to decide whether therecommendation is likely to have the predicted result. Be sure to explain howthe answers to these questions would help to evaluate the recommendation. In thisargument, the author suggests in the letter that Batavia government should takeaction to control the milk price to protect consumers' right. To support thesuggestion, the author cites a report showing that the number of farms in thenation is increasing. The author also mentions that the price of milk in alocal shop increased in the same time period. At the first glance, the argumentis somewhat convincing, but close scrutiny reveals that there are a few critical questions not answered and the recommendation is therefore unpersuasive.
First of all, it is a skeptical assumption that the supply of milk in the market is morethan before. Even assuming that the report by the department of agriculturethat there are more dairy farms is reliable, it does not mean that there ismore milk. It is entirely possible that the total number of cows in the countrydecrease since the average size of farms shrink a lot in the past ten years. Sothere might be even less milk available in market. Without more specificevidences, the author cannot draw a conclusion that the supply of milk isincreasing. Secondly, does the price of milk sold at a local market canrepresent prices of milk which are sold in other places is an important question. In the passage, theauthor assumes it is representive without sufficient evidences. However, it isentirely possible that the price of milk in another shop is only a half of theprice in the shop mentioned by the author. Without more statistically reliableevidences, I cannot accept the conclusion that the milk price isincreasing. Besides that,even assuming the price of milk really increase a lot, whethermilk is now too expensive is a question not well answered. Perhaps people'saverage salary doubles in the past ten years, so the price of milk remains lowcompared with people's income. Or perhaps the inflation rate is about 100% per year, so milk is even cheaper than most goods. Without ruling out such possibilities, the assumptionthat the price of milk is unfair is not persuasive. The final question, is a regulation by the government really necessary? As economic theories tell us, the market itself can regulate prices in most cases. If milk istoo expensive, farmers will probably get less money in that consumers might buyless milk. So, to sell more milk for profits, farmers have to lower the price.For that matter, government regulation might be unnecessary. To sum up, therecommendation that government should regulate milk price is unconvincing. Tostrengthen it, the author should estimate alternatives and offer specificevidences to answer critical questions above and prove that there is more milk in market and the price of milk isincreasing. To better access it, I also need to know average income of peoplein the country.
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