Question: Brazil is proposing a project that will increase cocoa beans production in the Amazonas Region of the country. Brazil is a net exporter of cocoa

Brazil is proposing a project that will increase cocoa beans production in the Amazonas Region of the country. Brazil is a net exporter of cocoa beans.

Assume the following:

The CIF at Liverpool (England) for cocoa beans is US$3200 per ton

Freight, insurance and unloading from Brazilian port of Belem to Liverpool is $30 per ton

Port charges at Belem in Brazil are BR 120 per ton

Transport and marketing costs from warehouse to Belem in Brazil is BRL 100 per ton

Storage, transport and marketing cost from point of production to warehouse is BRL 30 per ton

No export taxes

The Exchange rate is US$1= BRL 3.2 (Where BRL is Brazilian currency)

Opportunity cost of foreign exchange in Brazil is 10% higher than the official exchange rate

Answer the following questions:

A. Estimate the FOB price of cocoa in Brazilian currency

B. Estimate the wholesale market price of cocoa at a warehouse in Brazil

C. Estimate the economic price of cocoa at a warehouse in Brazil

D. Estimate the economic price of at farm gate.

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