Q) Sugar Import Ban. The sugar industry is another example of an increasing-cost industry. If the price of sugar is only 11 cents per pound, sugar production is profitable in areas with relatively low production costs, including the Caribbean, Latin America, Australia, and South Africa. At a price of 11 cents, the world supply of sugar equals the amount produced in these areas. As the price increases, sugar production becomes profitable in areas where production costs are higher, and as these areas enter the world market, the quantity of sugar supplied increases. For example, at a price of 14 cents per pound, sugar production is profitable in some countries in the European Union too. At a price of 24 cents, production is profitable even in the United States.
a. If the world price is 13 cents per pound, what areas of the world supply sugar to the world market and the United States?
A.The Caribbean, Latin America, Australia, South Africa, and some countries in the EU. B.The Caribbean, Latin America, Australia, South Africa, and the U.S. C.The Caribbean, Latin America, Australia, and South Africa. D.The Caribbean and Latin America.
b. Suppose the United States bans sugar imports. You predict that the new price of sugar in the U.S. will be at least $__. (Enter your response to two decimal places.)
Q) Related to Application: The Upward Jump and Downward Slide of Wine Prices Suppose the demand for shirts increases. In the short run, the price _A_ by a relatively large amount. As firms enter the market, the price _B_ . In the new long-run equilibrium, there is a net _C_ in price relative to the old equilibrium.
B.a.increases b. decreases
For question 1 Option C is correct response here as Price is 13 cents & Production Cost is 11 cents for these countries in option C hence it is profitable to sell sugar in worl markets for only countries in option C as other countries have higher production cost
For question 2
If US dont import any sugar from rest of the world it will have to consume domestic sugat which is costing as large as 24 cents hence the pricr of sugar in US will be at least 24 cents
For question 3
A.Price increases due to increase in demand for short term
B. Price decreases as Competition increases in the market
C. In the new long run there is decrease in Price relative to the old equilibrium
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