Question

John's company works with leaders in several South American countries in order to purchase their sugarcane byproduct for his plane prototype. Eilene represents her coffee company as a liaison between the coffee growers in Colombia and the Seattle-based company to determine compensation for the coffee product. A coffee company in Colombia diversifies its crops by also concentrating their harvests on sugar cane and cocoa beans. What is the expected outcome of these actions?

A) Both agricultural commodity prices and food prices will increase. Agricultural workers will benefit from higher profits and a more stable market. The market for agricultural commodities will be better protected from fluctuations.

B) There is no information provided to predict the outcome of these actions.

C) Both agricultural commodity prices and food prices will decrease. Agricultural workers will experience reduced profits and market instability. The market for agricultural commodities will become more vulnerable to fluctuations.

D) Only agricultural commodity prices will increase, while food prices remain stable. Agricultural workers will experience higher profits, but the market for agricultural commodities may still be vulnerable to fluctuations.

Answer 1

The impact of trade actions between John's company and South American countries, and Eilene with Colombian coffee growers, is unclear without more information. However, trade liberalization generally benefits producers in competitive export countries and consumers in import countries, while it may challenge local producers.

Step-by-step explanation:

The expected outcome of the actions described involving John's company and Eilene's representation of her coffee company is not deterministically predictable with the given information. However, drawing on economic principles and the effects of trade liberalization, we can consider some general tendencies. When trade barriers are removed, the sugar industry in countries with competitive advantages in sugar production tends to benefit due to increased export opportunities and higher prices for their products. On the other hand, prices for sugar may decrease in importing countries due to a greater supply from cheaper foreign sources, benefiting consumers but putting pressure on local producers to lower prices or increase efficiency.

Free trade typically causes an increase in overall market efficiency and can lead to a redistribution of income. It can make sugar cheaper and more available in countries without a comparative advantage in production, which benefits consumers but can lead to industrial pressure and potential job losses for workers in less competitive local industries.