Question

To minimize the average cost per day, find the number of pounds of sugarcane that should be processed.

a) 100 pounds
b) 200 pounds
c) 150 pounds
d) 120 pounds

Answer 1

To minimize the average cost per day, the quantity of sugar cane that should be processed depends on the equilibrium price and quantity of sugar. We can calculate the quantity of sugar cane using the equation: Quantity of sugar cane = Quantity of sugar demanded / Price of sugar per pound. By plugging in the quantities and prices for each option, we can determine the corresponding quantity of sugar cane.

Step-by-step explanation:

To minimize the average cost per day, the quantity of sugar cane that should be processed will depend on the equilibrium price and quantity of sugar. Without trade, the equilibrium price in the United States is 24 cents per pound and the equilibrium quantity is 80 tons. With trade, prices should converge to 16 cents per pound. To calculate the quantity of sugar cane that should be processed, we can use the equation:

Quantity of sugar cane = Quantity of sugar demanded / Price of sugar per pound

So for each option, we can plug in the quantities and prices given to find the corresponding quantity of sugar cane:

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