At our restaurant we strrive to make everything we can from local products. Chicken, beef, eggs, pork, cheeses, milk; pretty much all of our protein is produced locally. Even the tofu we get is produced by a local company.
We acquire as much local produce as possible as well. However, winter makes it difficult to keep local greens or vegetables in stock, menus must be altered to reflect what is available. If your favorite restaurant doesn't change its menu seasonally, it likely uses very little local produce.
Using local means you can vist farms and make sure that its up to the standard you desire. Not every thing can be local, fish is hard to come by in a state with no ocean border. Yet, each product you buy is required to tell you where it comes from, ut you will have to put th effort in (ie call) to see if the farm is something you want to deal with.
Why don't people use local products? They don't because it requires effort, where as picking up california strawberries in an east coast super market during February is easy.
Cost, from what I have encountered is a minimal issue. Our local meats are top quality and are actually cheaper than non-local meat of similar quality. Plus establishing a relationship with a CSA or a farmer means you will probably receive discounts for your patronage in the future. Of course, supporting local farmers also supports the local economy.