The federal government operates a system of dams, reservoirs and canals in California that the state relies on for agriculture and drinking water... This year, as the state's megadrought drags into its third year, the government said it had no water to give farmers.

As a result, many farmers plan to scale back plantings this year or expect to plant nothing. Already, rice growers in the northern part of the Central Valley, where a quarter of the United States' food is grown, have said they plan to leave their fields fallow, according to the California Rice Commission. California is the nation's second largest rice-producing state, specializing in medium- and short-grain 'sticky rice.'"

[Source: Washington Post, 'Four hidden reasons food prices are crazy right now', 21/04/2022]

2)

a. Assuming a competitive market, and using a hypothetical representative firm, explain and illustrate on a diagram the reason some growers have said they planned to "leave their fields fallow" (i.e. remain unplanted). [5 marks]

b. If the drought persists, what do you think might be the effect on the rice market in the long run? Explain with reference to the market price and market output. [5 marks]