Question

Needing help understanding the following questions. can someone please explain?

$1.60 $1.55 $1.50 $1.45 $1.40 $1.35 $1.30 Price of Green Leaf Lettuce ($ per Pound) $1.60 $1.55 $1.50 $1.45 $1.40 $1.35 U.S. Price $1.30 $1.25 $1.20 Northeast Supply Northeast Demand $1.25 $1.20 $1.15 $1.10 Rest of U.S. Supply Rest of U.S. Demand $1.15 $1.10 Quantity of Green Leaf Lettuce (Billion Pounds Northeast U.S. 6 78 9 10 Quantity of Green Leaf Lettuce (Billion Pounds ) Rest of U.S.

Answer 1

Part 1) The equilibrium point exists at the intersection of the demand and supply curves. In the Northeast U.S. the equilibrium price is $1.50/pound whereas in the Rest of the U.S. the equilibrium price is $1.30/pound. So, if the federal government offered a support price of $1.34/pound farmers in the Rest of the U.S. will benefit, but not the farmers in the Northeast (Option C). This is because, farmers in the Rest of the U.S. will not receive a price higher than the equilibrium price.

Part 2) If the Northeast U.S. sponsored a “buy local food” campaign that effectively ended imports from the Rest of the U.S., Farmers in the Northeast U.S. will benefit, but not the farmers in the Rest of the U.S. (Option B). This is because, this will mean that the farmers in the Northeast U.S. will receive higher price.