Suppose That Two Types of Indistinguishable Coffee Beans Are Imported

question 99

Multiple Choice

Suppose that two types of indistinguishable coffee beans are imported to the U.S.: those grown in the mountains of South America and those grown in greenhouses in Canada.Mountain grown coffee produces a better tasting coffee,but buyers cannot distinguish the beans by sight or smell.Only the importers know the source of the beans.Buyers value mountain grown beans at $10 a pound and greenhouse grown beans at $3 a pound.Assume that 70% of imported beans are mountain grown,and 30% are greenhouse grown.
If a buyer offers $7 per pound,and the importer accepts the offer

• A)the beans must be from Canada.
• B)the beans must be mountain grown.
• C)the beans may or may not be mountain grown.
• D)both the buyer and the importer will gain surplus.

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Definitions:

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