The diagram below shows supply and demand curves in the Canadian market for soybeans. The free market equilibrium and quantity are p* and Q*.

a. If the price of soybeans is at its market-clearing equilibrium level, p*, identify the areas on the graph that sum to this market?s total economic surplus.

b. Suppose the government imposes an output quota at Identify the areas on the graph that represent the reduction in economic surplus as a result of this government?s imposition of the quota.

c. Describe the effect of this quota on market efficiency. Is society as a whole better off?

Transcribed Image Text:

'D Quantity Price ($) halid