Decades of overfishing have dramatically reduced the world supply of cod (a type of whitefish). Farm-raised halibut is considered a close substitute for ocean-fished cod.

Problem 6-4 

Decades of overfishing have dramatically reduced the world supply of cod (a type of whitefish). Farm-raised halibut is considered a close substitute for ocean-fished cod. The graph below shows the market for farm-raised halibut. Dy and Sy indicate the supply and demand for halibut before the overfishing of cod.

a. As a result of overfishing cod, what happens in the market for halibut? 

• Supply will increase to S3. 

• Supply will decrease to S2. 

• Demand will decrease to D3. 

• Demand will increase to D2. 

As a result of overfishing cod, the price of halibut will (Click to select) 

b. A fast-food chain purchases both cod and halibut for use in its Fish 'n' Chips meals. Already hurt by the reduced supply of cod, the fast-food chain has lobbied aggressively for price controls on farmed halibut. As a result, Congress has considered imposing a price ceiling on halibut at the former equilibrium price-the price that prevailed before overfishing reduced the supply of cod. 

If Congress adopts the price control policy, then in the market for farmed halibut, quantity demanded (Clic to select) quantity supplied. 

Draw and label the price ceiling and deadweight loss that will result in the market for farmed halibut if Congress adopts the price control policy Instructions: Use the tools provided to draw the price ceiling (ceiling) and the deadweight loss (OWL).