Supply and demand curves for potatoes cross

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The American supply and demand curves for potatoes cross at $5 a pound, but potatoes are available in any quantity from abroad at $2 a pound. Each week, American sellers produce 500 pounds of potatoes and American buyers purchase a total of 1,200 pounds. Suppose the government prints and randomly distributes 250 non-reusable ration tickets each week, and requires that buyers present one ration ticket for each pound of imported potatoes that they buy. (You don't need a ration ticket to buy an American potato.) Ration tickets can be freely bought and sold. Draw a graph illustrating the market for potatoes, and on your graph indicate the price Americans now pay for potatoes, the price of a ration ticket, the gains and losses to all relevant groups, and the deadweight loss.

Reference no: EM131097160

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