1. Juan Valdez, a coffee farmer in Colombia, sells his coffee to Cafe Emporium, a U.S. firm which specializes in gourmet coffee blends. Which of the following must be true of this arrangement?
When Juan and other farmers in Colombia sell their coffee beans to foreigners, they gain in the short run, but in the long run will only impoverish their nation as a whole.

Juan thinks he is better off with this contract, but in reality the wealthy American buyer is taking advantage of Juan's naivete.

While this arrangement is good for Juan, he would be even better off if the government had negotiated the contract because they could have gotten a better price for Juan. Q All three of these statements must be true.

None of these statements must be true.

2. What can be inferred from the fact that Juan has voluntarily entered into a contract with Cafe Emporium?
Cafe Emporium is a monopoly.

Juan is earning zero economic profit selling coffee. Juan has negotiated a 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.

Answer rating: 100% (QA)

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