Why does that mean that the cabbage market is efficient?

Question 1: Consider a farmer in the Salinas Valley. She is deciding how best to use her 100 acres. Currently, she grows strawberries on 50 acres of her land and lettuce on the other 50 acres of land. (a) Using a production possibilities diagram, explain what happens to her economic costs when she grows more lettuce. (b) How would things change if new technologies meant more strawberries per acre? Use the Production Possibilities diagram. Question 2: Use a market diagram for the market for cabbage:
(a) The cabbage market is in equilibrium. Why does that mean that the cabbage market is efficient? Please explain completely.
(b) If cabbage becomes more popular, the market will still be efficient. Explain how market mechanisms ensure that the cabbage market will maintain efficiency, even if cabbage becomes more popular.
(c) Transporting cabbage from the Salinas Valley to the rest of the world uses fossil fuels (tractors, trucks, trains, and planes all are used to transport cabbage). Using a market diagram for cabbage, explain why that means the market equilibrium may not actually be efficient.

Leave a Comment