Juan Valdez, a coffee farmer in Colombia, sells his coffee to Cafe Emporium, a U.S. firm which specializes in gourmet coffee blends.   a. What must be true of this arrangement? Which sentence is true?   Juan believes he is better off with this contract, but in reality, the wealthy American buyer is taking advantage of Juan's naiveté.   When Juan and other farmers in Colombia sell their coffee beans to foreigners, their nation as a whole gains in the long run, as countries gain from trade.   While this arrangement is good for Juan, he would be better off if the government had negotiated the contract for him because the government could have gotten a better price.   Juan and other farmers in Colombia who make such transactions are made better off as a result.   b. What can be inferred from the fact that Juan has voluntarily entered into a contract with Cafe Emporium? Which sentence is true?     Juan is earning zero economic profit selling coffee.   Juan has negotiated a price that is favorable to him and therefore makes it difficult for Cafe Emporium to earn profits.   Juan is better off as a result of his deal with Cafe Emporium.   Cafe Emporium is a monopoly.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Juan Valdez, a coffee farmer in Colombia, sells his coffee to Cafe Emporium, a U.S. firm which specializes in gourmet coffee blends.
 
a. What must be true of this arrangement? Which sentence is true?
 
Juan believes he is better off with this contract, but in reality, the wealthy American buyer is taking advantage of Juan's naiveté.
 
When Juan and other farmers in Colombia sell their coffee beans to foreigners, their nation as a whole gains in the long run, as countries gain from trade.
 
While this arrangement is good for Juan, he would be better off if the government had negotiated the contract for him because the government could have gotten a better price.
 
Juan and other farmers in Colombia who make such transactions are made better off as a result.
 
b. What can be inferred from the fact that Juan has voluntarily entered into a contract with Cafe Emporium? Which sentence is true?
 
 
Juan is earning zero economic profit selling coffee.
 
Juan has negotiated a price that is favorable to him and therefore makes it difficult for Cafe Emporium to earn profits.
 
Juan is better off as a result of his deal with Cafe Emporium.
 
Cafe Emporium is a monopoly.
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