SCENARIO: SUGAR TRADE IN BIRDONIA

question 28

Multiple Choice

SCENARIO: SUGAR TRADE IN BIRDONIA
In autarky, suppose that equilibrium sugar price is $100 per
Ton in Birdonia, a small agricultural nation.Now, suppose
Birdonia engages in free trade with the rest of the world.
The world price of sugar is $125 per ton.
Reference: Ref 10­1
(Scenario: Sugar Trade in Birdonia) Now suppose that the
Government of Birdonia gives an export subsidy of $50 per
Ton to its sugar producers.What will happen to the
Domestic price of sugar in Birdonia?

• A)It will not change.
• B)It will rise to $175 per ton.
• C)It will rise to $150 per ton.
• D)It will rise to between $125 and $175 per ton.

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Definitions:

Real Price

The price of a good or service after adjusting for inflation, reflecting its purchasing power over time.

Consumer Price Index

A metric that tracks the average fluctuation in prices urban consumers pay for a selection of consumer products and services over time.

Retail Price Changes

refers to fluctuations in the price levels of goods and services sold by retailers to the end consumer, influenced by factors such as supply, demand, and production costs.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, with no single seller or buyer having market control.