Suppose That Two Types of Indistinguishable Coffee Beans Are Imported

question 18

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.
Suppose that no mountain-grown beans are imported because buyers are worried that they might end up with Canadian beans.To counteract this problem,bean importers allow buyers to taste a cup before purchasing their beans.As a result,

• A)Canadian beans will not sell at all.
• B)mountain grown beans will not sell at all.
• C)both kinds of beans will sell for the same price.
• D)mountain grown beans will sell for a higher price than Canadian beans.

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