2. Maine is a major source of blueberries for the US. The blueberry farmers in M

Question

2. Maine is a major source of blueberries for the US. The blueberry farmers in Maine rely on large irrigation systems from the nearby rivers to water their fields. The EPA has just placed the Atlantic Salmon of the list of endangered species. The listing will reduce and possibly eliminate the farmers’ ability to irrigate their crops.

a. Show what the EPA will cause in the blueberry market.
b. What happens to the price and quantity?
c. What happens to the gains from trade?
d. Who pays for the protection of the Atlantic Salmon?

- I don't know how to accurately, or even where to start answering how the EPA will cause a change in the market. Parts b-d I have an idea, but would like to see what you think and the solution will really help in solving future problems like this.

Explanation / Answer

The EPA's decision will increase the costs and decrease the blueberry yields so the supply curve for blueberries will move to the left, increasing the price and decreasing the quantity traded. Since the quantity traded goes down, gains from trade are decreased, both consumer and producer surplus is reduced. Both the producers and consumers of blueberries will pay for the protection of the salmon, in reduced surplus.

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