Figure 1 shows the market for cranberries.

1. What are the equilibrium price and quantity of cranberries? Is the market for cranberries efficient?

2. If the government sets a production quota of 20 billion pounds, what is the quantity of cranberries produced, the quantity demanded, and the price of a pound of cranberries?

3. If the government sets a production quota of 20 billion pounds, is the market for cranberries effi cient? What is the deadweight loss created? Who gains and who loses from the production quota? Could the production quota be regarded as being fair?

Transcribed Image Text:

FIGURE 1 Price (cents per pound) 40 35+ 30 25 20 15+ 10+ 5 0 S D 10 20 30 40 50 60 70 80 Quantity (billions of pounds per year)